Firm Size vis-Ã -vis Industry Size and Innovation in a Dominant Firm-fringes Oligopoly Model

Richa Shukla, Surajit Bhattacharyya () and Krishnan Narayanan ()

Foreign Trade Review, 2016, vol. 51, issue 1, 13-25

Abstract: This article explores the possibility of associating firm size vis-Ã -vis industry size with firm-level R&D led-innovation and the resultant impact(s) on industry level output and price. We consider an oligopolistic industry having one dominant firm and some fringes . Innovation by the dominant firm is viewed both as a technological breakthrough and as (cost) augmenting monetary expenditure. When innovation is considered as technological breakthrough, then for the benevolent industry leader, its scope for output expansion is more if R&D is induced by the industry size vis-Ã -vis firm size. However, when R&D led innovation is seen as cost augmenting, then the industry size induced innovation yields greater output if the dominant firm acts as a Stackelberg leader. Therefore, we show that exploiting the industry size renders a higher incentive to innovate for the industry leader in terms of capacity expansion.

Keywords: Innovation; dominant firm; fringes; Cournot oligopoly (search for similar items in EconPapers)
JEL-codes: D21 D43 L13 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:fortra:v:51:y:2016:i:1:p:13-25

DOI: 10.1177/0015732515614436

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