Innovation and competitive pressure

Xavier Vives

No D/634, IESE Research Papers from IESE Business School

Abstract: The effects of competition on process and product innovation are analyzed, obtaining robust results that hold for a range of market structures. It is found that increasing the number of firms tends to reduce R&D effort, whereas increasing the degree of product substitutability, with or without free entry, increases R&D effort -provided that the total market for product varieties does not shrink. Increasing the total market size increases R&D effort and has ambiguous effects on the number of varieties offered, while decreasing the cost of entry increases the number of entrants and varieties but reduces R&D effort per variety. The framework and results shed light on empirical strategies to assess the impact of competition on innovation.

Keywords: cost reduction; X-inefficiency; market concentration; market size; substitutability; product introduction; corporate governance; globalization (search for similar items in EconPapers)
Pages: 53 pages
Date: 2006-06-10
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse, nep-ent, nep-ino, nep-mic and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Journal Article: INNOVATION AND COMPETITIVE PRESSURE* (2008)
Working Paper: Innovation and Competitive Pressure (2005)
Working Paper: Innovation and Competitive Pressure (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:iesewp:d-0634

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