 Competition, R&D, and the Cost of InnovationPhilippe Askenazy, Christophe Cahn and Delphine Irac Working papers from Banque de France Abstract: This paper proposes a model in the spirit of Aghion et al. (2005) that encompasses the magnitude of the impact of competition on R&D according to the cost of the innovation. The effect of competition on R&D is an inverted U-shape. However, the shape is flatter and competition policy is therefore less relevant for innovation when innovations are relatively costly. Intuitively, if innovations are costly for a firm, competitive shocks have to be significant to alter its innovation decisions. Empirical investigations using a unique panel dataset from the Banque de France show that an inverted U-shaped relationship can be clearly evidenced for the largest firms, but the curve becomes flatter when the relative cost of R&D increases. For large costs, the relationship even vanishes. Consequently, in sectors in which innovations are costly, policy changes have to be on a very large scale for an impact to be expected; at the extreme end, in certain sectors, the curve is so at that competition policy is not an appropriate tool for boosting the research effort of firms. Keywords: Competition; R&D; Innovation. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:197 Access Statistics for this paper More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC. |
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