Competition and Innovation in Product Quality: Theory and Evidence from Eastern Europe and Central Asia

Karaman Fatma Nur () and Sajal Lahiri
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Karaman Fatma Nur: Department of Economics, Yasar University, Izmir 35100, Turkey
Authors registered in the RePEc Author Service: Fatma Nur Karaman Kabadurmus

The B.E. Journal of Economic Analysis & Policy, 2014, vol. 14, issue 3, 979-1014

Abstract: This paper examines how the degree of competition affects incentives to innovate in product quality in a symmetric Cournot oligopolistic model. We model product quality in a quality-ladder framework and find an inverted-U shaped relationship between the number of firms in an industry and R&D efforts in innovation. We test this theoretical prediction using firm-level data for Eastern European and Central Asian countries from the Business Environment and Enterprise Performance Survey and find strong support for it.

Keywords: product quality; R&D; competition; EECA (search for similar items in EconPapers)
JEL-codes: D22 D43 O14 O25 O32 (search for similar items in EconPapers)
Date: 2014
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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DOI: 10.1515/bejeap-2012-0013

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