Competition and Innovation - Microeconometric Evidence Using Finnish Data

Juha Kilponen () and Torsten Santavirta
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Torsten Santavirta: University of Helsinki

Abstract: In this study we provide a theoretical prediction of a complementary relationship between the incentive effects of product market competition and R&D subsidies using the theory of Aghion et. al (1997, 2001). The complementarity relationship and that of an inverted U-relationship is then tested using a large Finnish firm level data set combined with patent and patent citations of the firms. Econometric analysis shows that the inverted U-relationship is fairly robust to different innovation measures derived from patent data. We also find that the inverted-U relationship tends to be steeper when also R&D subsidies are considered. This result suggests that there exists a complementarity between competition and R&D subsidies.

Keywords: Product market competition; Innovations; R&D subsidies (search for similar items in EconPapers)
JEL-codes: L (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ino, nep-mic and nep-tid
Date: Written 2005-09-16
Note: Type of Document - pdf; pages: 100
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http://129.3.20.41/eps/io/papers/0509/0509009.pdf (application/pdf)

Related works:
Working Paper: Competition and Innovation - Microeconometric Evidence using Finnish Data (2004)
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