Price Competition, Innovation and Profitability: Theory and UK Evidence

George Symeonidis ()

No 2816, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This Paper examines the effect of price competition on innovation, market structure and profitability in R&D-intensive industries. The theoretical predictions are tested using UK data on the evolution of competition, concentration, innovation counts and profitability over 1952-77. The econometric results suggest that the introduction of restrictive practices legislation in the UK had no significant effect on the number of innovations commercialized in previously cartelized R&D-intensive manufacturing industries, while it caused a significant rise in concentration in these industries. In the short run profitability decreased, but in the long run it was restored through the rise in concentration.

Keywords: Cartels; Innovation; Manufacturing; Market structure; Profitability; Price competition; Uk (search for similar items in EconPapers)
JEL-codes: L11 L13 O31 (search for similar items in EconPapers)
Date: 2001-05
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Citations: View citations in EconPapers (15)

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