Competition and Innovation: An Inverted-U Relationship
Peter Howitt (),
Rachel Griffith (),
Richard Blundell () and
Nicholas Bloom ()
Scholarly Articles from Harvard University Department of Economics
This paper investigates the relationship between product market competition and innovation. We find strong evidence of an inverted-U relationship using panel data. We develop a model where competition discourages laggard firms from innovating but encourages neck-and-neck firms to innovate. Together with the effect of competition on the equilibrium industry structure, these generate an inverted-U. Two additional predictions of the modelâ€”that the average technological distance between leaders and followers increases with competition, and that the inverted-U is steeper when industries are more neck-and-neckâ€”are both supported by the data.
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Published in Quarterly Journal of Economics
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Journal Article: Competition and Innovation: an Inverted-U Relationship (2005)
Working Paper: Competition and innovation: an inverted U relationship (2002)
Working Paper: Competition and Innovation: An Inverted U Relationship (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:4481507
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