The Causal Effects of Competition on Innovation: Experimental Evidence

Philippe Aghion, Stefan Bechtold, Lea Cassar () and Holger Herz

Scholarly Articles from Harvard University Department of Economics

Abstract: In this paper, 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, i.e. 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: 2014
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Citations: View citations in EconPapers (33)

Published in Nber Working Paper Series

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http://dash.harvard.edu/bitstream/handle/1/2773868 ... s_of_competition.pdf (application/pdf)

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 (2018)
Working Paper: The Causal Effects of Competition on Innovation: Experimental Evidence (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:27738688

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