Economics at your fingertips  

Competition and Innovation - Microeconometric Evidence using Finnish Data

Juha Kilponen () and Torsten Santavirta ()

No 113, Research Reports from VATT Institute for Economic Research

Abstract: The relationship between product market competition (PMC) and innovative activity has attracted the attention of many economists lately. In this study we elaborate the theory of Aghion et al. (1997, 2001) of an inverted-U relationship between competition and innovations. We provide a theoretical prediction of a complementary relationship between the incentive effects of PMC and R&D subsidies. We empirically test our complementarity prediction and that of an inverted-U relationship using Finnish firm level data. Our results suggest that the inverted-U relationship is fairly robust to all our innovation measures. We also find that the inverted-U relationship tends to be steeper when also direct R&D subsidies are considered. This result suggests that there exists complementarity between competition and R&D subsidies.

Keywords: Product market competition, Innovation, RD subsidies, Economic growth, Taloudellinen kasvu, Taxation and Social Transfers, Julkisen talouden rahoitus ja tulonsiirrot, L100 - Market Structure, Firm Strategy, and Market Performance: General, O100 - Economic Development: General, O300 - Technological Change; Research and Development: General, O310 - Innovation and Invention: Processes and Incentives, (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-com, nep-cse, nep-ind, nep-ino, nep-mic and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)

Related works:
Working Paper: Competition and Innovation - Microeconometric Evidence Using Finnish Data (2005) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Research Reports from VATT Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Anita Niskanen ().

Page updated 2022-09-06
Handle: RePEc:fer:resrep:113