The Causal Effects of Competition on Innovation: Experimental Evidence

Philippe Aghion (), Stefan Bechtold, Lea Cassar () and Holger Herz
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Philippe Aghion: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, Collège de France - Chaire Economie des institutions, de l'innovation et de la croissance - CdF (institution) - Collège de France
Stefan Bechtold: ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]

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Abstract: We design two laboratory experiments to analyze the causal effects of competition on step-by-step innovation. Innovations result from costly R&D investments and move technology up one step. Competition is inversely measured by the ex post rents for firms that operate at the same technological level, that is, for neck-and-neck firms. First, we find that increased competition leads to a significant increase in R&D investments by neck-and-neck firms. Second, increased competition decreases R&D investments by firms that are lagging behind, in particular if the time horizon is short. Third, we find that increased competition affects industry composition by reducing the fraction of sectors where firms are neck-and-neck. All these results are consistent with the predictions of step-by-step innovation models.

Date: 2018-05
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Citations: View citations in EconPapers (24)

Published in Journal of Law, Economics, and Organization, 2018, 34 (2), ⟨10.1093/jleo/ewy004⟩

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Related works:
Journal Article: The Causal Effects of Competition on Innovation: Experimental Evidence (2018)
Working Paper: The Causal Effects of Competition on Innovation: Experimental Evidence (2018)
Working Paper: The Causal Effects of Competition on Innovation: Experimental Evidence (2014)
Working Paper: The Causal Effects of Competition on Innovation: Experimental Evidence (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01883563

DOI: 10.1093/jleo/ewy004

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