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Price competition vs. quality competition: Evidence from firm surveys

Masayuki Morikawa

Journal of Economics and Business, 2021, vol. 116, issue C

Abstract: This study uses data from firm surveys to present new findings on firms’ strategies for price/quality competition and on the relationship between competition strategy and various firm characteristics, including profitability and productivity. First, the results indicate that a relatively large number of firms adopt a quality competition strategy, particularly firms operating in the service industries. Second, firms adopting a quality competition strategy tend to have highly educated employees, invest in intangible assets, such as R&D and advertising, and show a higher probability of innovating. Third, the profitability and productivity of firms adopting a quality competition strategy is higher than that of firms adopting a price competition strategy, although the difference in productivity according to competition strategy should be interpreted with caution.

Keywords: Competition; Quality; Differentiation; Innovation; Profitability; Productivity (search for similar items in EconPapers)
JEL-codes: D22 D24 L11 L13 M21 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jeconbus.2021.106007

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