The bright side of product market threats: The case of innovation

Danh Vinh Le, Huong Thi Thu Le and Lai Van Vo

International Review of Economics & Finance, 2021, vol. 71, issue C, 161-176

Abstract: Using Hoberg, Phillips and Prabhala’s (2014) product market fluidity to capture competitive threats, we find that firms with high product market threats will invest more in R&D and generate higher number of patents and patent citations. In addition, this positive effect of competitive threats on innovation is more pronounced for firms with smaller market shares or in more competitive industries. We also document that investing more in innovation helps competition-threatened firms increase their market power in the future. Overall, our results suggest that product market threats create incentives for firms to innovate to “escape” competitive pressure.

Keywords: Competition; Innovation; Patent; Product market threats; R&D investments (search for similar items in EconPapers)
JEL-codes: G30 G31 G32 O31 O32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:71:y:2021:i:c:p:161-176

DOI: 10.1016/j.iref.2020.09.008

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