Is Competition Good for Innovation? A Simple Approach to an Unresolved Question

Schmutzler, Armin

doi:10.1561/0700000035

Cited by 35 publications

(20 citation statements)

References 68 publications

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“…The relationship between competition and innovation has long been of interest to economists and motivated numerous studies, both theoretical and empirical, over the past three decades (e.g., Hart (1980); Schmidt (1997); Aghion et al (2001); Vives (2008); Schmutzler (2009Schmutzler ( , 2013 and Nickell (1996); Blundell et al (1999); Aghion et al (2005); Aghion and Griffith (2006)). However, the existing empirical studies on this subject face the issue that the relationship between competition and innovation is endogenous (Jaffe (2000); Hall and Harhoff (2012)).…”

Section: Introductionmentioning

confidence: 99%

The Causal Effects of Competition on Innovation: Experimental Evidence

Aghion

Bechtold

Cassar

et al. 2014

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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.

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Section: Introductionmentioning

confidence: 99%

The Causal Effects of Competition on Innovation: Experimental Evidence

Aghion

Bechtold

Cassar

et al. 2014

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“…Branstetter, Fisman and Foley (2006) focus on a di §erent research question, investigating how the extent of technology transfers 5 See Aghion et al (2001) and Acemoglu, Aghion and Zilibotti (2006), in particular, but also Acemoglu (2009), and Acemoglu and Akcigit (2012). With regard to the related theoretical literature in industrial organization, we refer the reader, among others, to Tirole (1988), Scotchmer (2004), Gilbert (2006), Vives (2008), and Schmutzler (2010, 2012. 6 In Aghion et al (2005, the SMP provides the excluded instruments that are used in instrumental variable and control function models explaining innovation or productivity growth.…”

Section: Introductionmentioning

confidence: 99%

Patent Rights, Product Market Reforms, and Innovation

Aghion

Howitt

Prantl

2013

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Can patent protection and product market competition complement each other in enhancing incentives to innovate? In this paper, we address this question by investigating how innovation responses to a substantial policy initiative increasing product market competition interact with the strength of patent rights. We provide empirical evidence of innovation responding positively to the product market reform in industries of countries where patent rights are strong, not where these are weak. The positive response to the reform is more pronounced in industries in which innovators rely more on patenting than in other industries, and in which the scope for deterring entry through patenting is not too large. Our empirical findings are in line with step-by-step innovation models predicting that product market competition enhances innovation and, more importantly, that patent protection can complement competition in inducing innovation.

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“…Specifically, according to Aghion et al (2005), the relationship is an inverted-U, where competition encourages innovation in firms that operate at similar technological levels and discourages innovation in laggard firms, all caused by the difference between the firm's pre-and post-innovation rents. For further analysis see Hart (1980); Schmidt (1997); Aghion et al (2001); Vives (2008) ;Schmutzler (2009Schmutzler ( , 2013Nickell (1996) ;Blundell, Griffith, and Reenen (1999); Aghion et al (2005); Aghion and Griffith (2006); Aghion et al (2014).…”

Section: A Weak Innovation Climatementioning

confidence: 99%

The New Imperative of Innovation: Policy Perspectives for Latin America and the Caribbean

Navarro¹,

Benavente²,

Crespi³

2016

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The main purpose of this study is to present the conceptual basis that supports science, technology, and innovation (STI) policy in Latin America and the Caribbean (LAC). It starts by clarifying STI relationship, both conceptual and empirical, to economic growth and it explains how market and coordination failures hinder innovation. Then, it discusses a variety of demand-and supply-side policies aimed at addressing these private sector and institutional insufficiencies. In the specific case of LAC, it examines the region's underperformance in innovation relative to both emerging and advanced economies, and analyses the degree to which scientific productivity and knowledge inputs have led to accelerated economic development. Finally, the publication presents five dimensions of success for STI policies based on international best practices that should stimulate innovation and economic growth and guide the IDB's work in STI in the region. Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of the IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.

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Is Competition Good for Innovation? A Simple Approach to an Unresolved Question

Cited by 35 publications

References 68 publications

The Causal Effects of Competition on Innovation: Experimental Evidence

The Causal Effects of Competition on Innovation: Experimental Evidence

Patent Rights, Product Market Reforms, and Innovation

The New Imperative of Innovation: Policy Perspectives for Latin America and the Caribbean

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