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Strategic Choice between Process and Product Innovation under Different Competitive Regimes

Luigi Filippini () and Gianmaria Martini ()

No itemq0953, DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi from Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)

Abstract: This paper investigates the strategic choice between introducing a process or a product innovation in a duopoly model with vertical differentiation, comparing the outcomes in case of Bertrand and Cournot competition. It is shown that under both competitive regimes three equilibria in innovation adoption may arise: two symmetric equilibria, where firms select the same innovation type, and one asymmetric equilibrium. The competitive regime has an impact on the features of the asymmetric equilibrium, since in case of Bertrand competition, the high (low) quality firm chooses a product (process) innovation, while firms make the opposite choices in case of Cournot competition. The presence of a leapfrogging effect (only in the Cournot competitors tend to favor the introduction of a new product in comparison with the Bertrand competitors.

Keywords: vertical differentiation; innovation adoption; process and product innovation; competitive regime. (search for similar items in EconPapers)
JEL-codes: D43 L15 O33 (search for similar items in EconPapers)
Pages: nn pages
Date: 2009-01
New Economics Papers: this item is included in nep-com, nep-cse, nep-ino, nep-knm, nep-mic and nep-tid
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http://www.unicatt.it/Istituti/TeoriaEconomica/Quaderni/itemq0953.pdf First version, March, 2007 (application/pdf)

Related works:
Journal Article: STRATEGIC CHOICE BETWEEN PROCESS AND PRODUCT INNOVATION UNDER DIFFERENT COMPETITIVE REGIMES (2010) Downloads
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