Time Based Competition and Innovation
David Thesmar and
Mathias Thoenig ()
No 3293, CEPR Discussion Papers from C.E.P.R. Discussion Papers
By choosing their organizations, firms trade-off productive efficiency and time spent in implementing innovation. We embed such a productivity/reactivity trade-off in a growth model with creative destruction. We first highlight the specific impact of time in firm competition: in addition to weighing costs and benefits of late adoption, firms use time as a strategic variable through the possibility of overtaking their competitors. Due to this very specificity of time competition, multiple equilibria may emerge: when firms adopt quickly, their stock market valuation is larger, and they innovate more and produce less. Moreover, the IT revolution is shown to favour quick implementation via a general equilibrium feedback on organizational choice.
Keywords: competition; firm organisation; innovation; reactivity (search for similar items in EconPapers)
JEL-codes: L16 L23 O32 (search for similar items in EconPapers)
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