Service-sector competition, innovation and R&D

Patrik Tingvall and Patrik Karpaty

No 702, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: The central prediction of the Aghion et al. (2005) model is an inverted U-shaped relation between innovation and competition. The model is built on the assumption of a product market and has not yet been empirically tested on service-sector firms. Using detailed firm-level data, we find the inverse U-shaped relation to hold for both small and large service-sector firms. However, non-exporting service firms deviate from the overall pattern. A more detailed breakdown of innovation expenditures shows that the inverse U-shaped pattern holds for both intramural R&D and training, but not for extramural R&D. Finally, as competition increases, small firms tend to seek more strategic alliances with competitors while large firms tend to decrease their collaboration with competitors. To some extent, the behavior of large firms can be due to their greater capacity to handle innovation projects internally and as competition increases, so does the payoff of an edge to competitors.

Keywords: R&D; innovation; competition; service sector (search for similar items in EconPapers)
JEL-codes: D40 L10 L60 O30 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2008-10-10
New Economics Papers: this item is included in nep-com, nep-cse, nep-ino, nep-knm, nep-mic, nep-ppm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Service-sector competition, innovation and R&D (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0702

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