Competition, R&D and innovation in Chilean firms

Abstract

Purpose The purpose of this paper is to analyze the effect of competition on both innovation inputs and outputs in Chilean firms. More specifically, the authors investigate whether there is an inverted-U relationship at different stages of the innovation process. Design/methodology/approach The sample covers 1,347 firms that responded to both the 4th Chilean Longitudinal Enterprise Survey and the 10th Chilean Innovation Survey. The CDM model (Crépon et al., 1998) is applied to correct for selectivity bias and endogeneity. Competition is proxied by measures of market concentration. The robustness of the results is checked using four alternative indicators. Findings The results strongly suggest that competition and both R&D and innovation intensities are linked by an inverted U-shaped curve. The estimated effects of competition on innovation output and labor productivity are rather ambiguous. Thus, market structure would be influencing the firms’ incentives to innovate, but not necessarily their innovation performance. Research limitations/implications The model is based on cross-sectional data, hampering the possibility to control for unobserved heterogeneity. Competitive pressures from potential entrants and foreign markets are not captured in the analysis. Practical implications Moderate levels of competition would be the optimal market structure in terms of promoting more business R&D and innovation spending. Originality/value A previously unutilized data set covering the whole economy is used. Estimations are executed at three different stages of the innovation process. Two types of innovation input and four types of innovation output are taken into account.

Business Survival and the Influence of Innovation on Entrepreneurs in Business Incubators

“…There is some work on innovation linked to business development [1], such as a study which points out the positive effect of organizational innovation on company growth based on a sample of 4125 Spanish companies; or a research that concludes the existence of a correlation between competition and innovation, a study of 1347 companies in Chile [44]. Organizational learning capabilities have a positive impact on innovation performance, especially in organizations where knowledge exploitation is the main source of competitive advantage [45].…”

An empirical examination of the Impact of Initial Capital, Prior Experience, and R&D on SMEs’ Survival and Economic Performance: Moderating Role of Innovation Culture

“…Besides, (Mukhopadhyay, 1985) suggests that the entry barrier can be reduced through quick imitation and a new firm can survive if it can imitate the R&D of other successful firms. The advancement of new technologies mitigates production costs and increases SME profitability which further impacts its survival positively (Greenhalgh & Rogers, 2006;Montégu et al, 2019;Peneder & Wörter, 2014). Small ventures can enter small markets and compete with other small firms.…”

Is Innovation a Driver of Sustainability? An Analysis from a Spanish Region

“…There are works on innovation linked with business development, such as Corsi et al [81], which point out the positive effect of organizational innovation on companies' sales and productivity growth with a sample study of 4125 Spanish companies. Another notable work is that by Montégu et al [82], which found a correlation between competition and innovation after studying 1347 Chilean firms. Del Campo et al [83] studied whether firms located in incubators with more intense innovation strategies better performed, and were measured in terms of their sales revenue, growth, performance, economic and financial profitability than those firms not categorized as innovative and with weaker innovation strategies.…”