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Competition, R&D and the cost of innovation

Philippe Askenazy (), Christophe Cahn () and Delphine Irac
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Delphine Irac: Centre de recherche de la Banque de France - Banque de France

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Abstract: This paper proposes a model in the spirit of Aghion and al. (2005) that relates the magnitude of the impact of competition on R&D to the cost of innovation. The effect of competition on R&D is an inverted U-shape. However, the shape is flatter and competition policy is therefore less relevant for innovation when innovations are relatively costly. Intuitively, if innovations are costly for a firm, competitive shocks have to be significant to alter its innovation decisions. Empirical investigations using a unique panel dataset from the Banque de France show that an inverted U-shaped relationship can be clearly evidenced for the largest firms, but the curve becomes flatter when the relative cost of R&D increases. For large costs, the relationship even vanishes.

Keywords: concurrence; competition; R&D; innovation (search for similar items in EconPapers)
Date: 2008-05
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Working Paper: Competition, R&D, and the Cost of Innovation (2008) Downloads
Working Paper: Competition, R&D and the cost of innovation (2008) Downloads
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