Endogenous Market Structures and Innovation by Leaders: An Empirical Test

Czarnitzki, Dirk; Etro, Federico; Kraft, Kornelius

doi:10.2139/ssrn.1874084

Cited by 7 publications

(8 citation statements)

References 29 publications

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“…The more ATV knowledge incumbents accumulated, the higher was the ATV-patent-increase effect of foreign entrants on incumbents. Given that more advanced incumbents responded more strongly, their responses seem to be of competitive nature which was found also in previous studies (e.g., Czarnitzki et al, 2011;Iacovone et al, 2011;Fritsch and Changoluisa, 2014). One explanation is that incumbents increased patenting in response to foreign entrants that are exceptionally challenging (e.g., Tesla Motors or BYD).…”

supporting

confidence: 73%

“…Aghion and Bessonova (2006), Czarnitzki et al (2011), Iacovone et al (2011, and Fritsch and Changoluisa (2014) find stronger responses to entry for leading incumbents in terms of sales, productivity, and distance to the technological frontier. Their studies, however, are based on a different framework.…”

Section: Second Hypotheses Setmentioning

confidence: 92%

“…The most important studies are highlighted below. Czarnitzki et al (2008Czarnitzki et al ( , 2011 examine the German manufacturing sector. They test whether incumbents show different innovative behaviors when being faced with the threat of entry as opposed to situations when there is no entry threat.…”

Section: Literature Reviewmentioning

confidence: 99%

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Incumbents' Responses to Innovative Entrants A Multi-Country Dynamic Analysis

Diekhof

Cantner

2017

SSRN Journal

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Incumbents' Responses to Innovative Entrants -A Multi-Country Dynamic AnalysisAuthors:Josefine Diekhof, josefine. AbstractThe influence of innovative entrants on incumbents is considered important for technological change. We analyze this influence for the global transition towards alternative technology vehicles (ATVs). Our results indicate that entrants' ATV-related knowledge accumulation stimulates average incumbent's ATV-related research. Regarding global entrants, incumbents with higher ATV patent stocks increased patenting stronger; supporting previous literature on competitive reactions to entry. Responding to domestic entrants, however, incumbents with low ATV patent stocks increased whereas incumbents with high stocks decreased patenting; suggesting that advanced incumbents outsource research or overtake entrants. Further, certain characteristics and not merely the quantity of entrants drive incumbents' responses. IntroductionThe crucial role of innovative entrepreneurs in accelerating technological change is well known by Schumpeter's (1911/34) early work. While increasing firm concentration has a hampering effect, entry stimulates innovations within an industry (Geroski, 1990). Especially new markets for radical innovations are often shaped by many new entrants (Markides and Geroski, 2005). Given their lack of competences in dominant designs, entrants barely face opportunities to exploit mature technologies but instead spark technological transitions by introducing disruptive innovations that reduce entry barriers (Tushman and Anderson, 1986;Utterback, 1994) [a] . Entrants are considered as intrinsically motivated and not purely profit driven, often intending to achieve social change. However, they are not strong enough to enforce transitions alone and often remain in niche markets (Markides and Geroski, 2005;Schaltegger and Wagner, 2011). Radical technologies cannibalize profit from incumbents' existing products and disrupt the value of their present knowledge base. Consequently, incumbents tend to advance their existing products with incremental improvements and process innovations instead of propelling immature radical technologies in early transitional phases (Gort and Klepper, 1982;Henderson and Clark, 1990;Christensen, 1997). 1We perceive these different innovation tendencies of entrants and incumbents as especially relevant for the transition from dirty towards environmentally friendly technologies. Many sectors in need for a change are chara...

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supporting

confidence: 73%

Section: Second Hypotheses Setmentioning

confidence: 92%

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Incumbents' Responses to Innovative Entrants A Multi-Country Dynamic Analysis

Diekhof

Cantner

2017

SSRN Journal

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“…For instance, risk constraints are found to increase the probability of cooperation (Czarnitzki et al 2014), as successful innovators may become the market leader and increase their market share. This distortion is more plausible in home markets dominated by one or few big firms (national champions), or in small niche market.…”

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confidence: 99%

University and inter-firm R&D collaborations: propensity and intensity of cooperation in Europe

2015

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This paper investigates the determinants of firms' decision to cooperate in R&D with universities and the intensity of the cooperation effort, in relation to the engagement in inter-firm R&D collaborations. Using novel survey data for seven EU countries between 2007 and 2009, our analysis accounts for unobservable factors influencing R&D cooperation forms and addresses the main endogeneity issues. We find that internal knowledge, appropriability conditions and incoming spillovers explain large variation in the probability and in the intensity of R&D collaborations of European firms with universities (and comparably with unaffiliated companies).JEL code: C24, D22, O31

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“…Some of the early dynamic general equilibrium models that stimulated this second generation of research include endogenous growth models with EMSs and endogenous sunk costs as in Peretto (1999), the pathbreaking analysis of trade with heterogenous costs and endogenous entry by Melitz (2003) and Schumpeterian growth models with EMSs in the patent races as in Etro (2004). Most of the recent literature in the industrial organization tradition has been focused on the analysis of endogenous technology (Vives, 2008), limit pricing strategies (Etro, 2013;Kováč et al, 2010) and various aspects of contract theory and antitrust theory in markets whose structure is endogenous. In the field of international trade recent important works have been focused on the analysis of the endogenous number and productivity of the exporting firms (Ghironi and Melitz, 2005;Neary, 2010;Eckel and Neary, 2010), on endogenous sunk costs in global markets (Sutton, 2007) and on foreign direct investments and strategic trade policy for markets with free entry.…”

mentioning

confidence: 99%

The Theory of Endogenous Market Structures

Etro

2013

Journal of Economic Surveys

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Abstract. Most market structures are neither perfectly or monopolistically competitive: they are characterized by a few large firms that are engaged in strategic interactions in their production and investment decisions and whose number is endogenous. The theory of endogenous market structures analyzes markets in partial and general equilibrium where strategies affect entry and entry affects strategies, and exogenous primitive conditions on technology and preferences affect the equilibrium. We discuss applications to industrial organization, international trade, business cycle theory, international finance, growth and implications for welfare and for competition, trade, fiscal and monetary policy.

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Endogenous Market Structures and Innovation by Leaders: An Empirical Test

Cited by 7 publications

References 29 publications

Incumbents' Responses to Innovative Entrants A Multi-Country Dynamic Analysis

Incumbents' Responses to Innovative Entrants A Multi-Country Dynamic Analysis

University and inter-firm R&D collaborations: propensity and intensity of cooperation in Europe

The Theory of Endogenous Market Structures

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