Competitive pressure determinants and innovation at the firm level

Paz Coscollá-Girona (), Pilar Beneito, Amparo Sanchis Llopis and Maria Engracia Rochina Barrachina
Additional contact information
Paz Coscollá-Girona: Dpto. Análisis Económico
Amparo Sanchis Llopis: Universitat de València
Authors registered in the RePEc Author Service: Amparo Sanchis-Llopis

Working Papers. Serie EC from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: This paper provides empirical evidence on the relationship between indicators of competitive pressure and innovation incentives using panel data of Spanish manufacturing firms for the period 1990-2006. Instead of using standard indicators of competition, such as market concentration measures or firms’ price costs margins, we analyze a number of indicators of competitive pressure directly related to the demand and cost conditions faced by firms. We consider the likely different incentives faced by firms to undertake product innovation versus process innovation efforts, and estimate a multivariate probit model for the probability of firms to introduce product innovations, process innovations or both. Our results are consistent with the theoretical predictions of Vives (2008) for free entry. We obtain that product market substitutability, entry costs and market size significantly affect the probability to introduce product and process innovations but that the effect of these variables differs among the type of innovation. We also find different effects of competitive pressure on innovation when taking into account the efficiency level of the firm relative to the efficiency distribution within its industry.

Keywords: competitive pressure; cost-reduction; process innovations; demand-enhancing; product innovations; relative efficiency (search for similar items in EconPapers)
JEL-codes: D22 L10 L60 O31 (search for similar items in EconPapers)
Pages: 1 pages
Date: 2011-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasec:2011-02

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