The Causal Effects of Competition on Innovation:  Experimental Evidence

Aghion, Philippe; Bechtold, Stefan; Cassar, Lea; Herz, Holger

doi:10.3386/w19987

Cited by 52 publications

(29 citation statements)

References 22 publications

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“…Spending on R&D fosters employee creative activities, which enable firms to generate new products and processes that effectively satisfy dynamic needs of customers (Pike et al, ; Pateli and Lioukas, ). Given the importance of employee creativity in transferring R&D spending into innovative outcomes (Aghion et al, ), scholars have examined a variety of antecedents of employee creativity in R&D context (e.g., Tang, ; Yun and Lee, , Zhu et al, ), among which the role of leadership has attracted particular attention given the preeminent effect of leaders in influencing employee behavior (Elkins and Keller, ). In line of the inquiry, several studies have suggested that Leader‐Member exchange (LMX), which denotes the quality of exchange relationship between the dyad, facilitates employee creativity (e.g., Khazanchi and Masterson, ; Hemlin and Olsson, ).…”

Section: Introductionmentioning

confidence: 99%

Close relationship with the supervisor may impede employee creativity by suppressing vertical task conflict

Zhang

Zhou

2019

R & D Management

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Leader-member exchange as a form of supportive leadership is expected to foster employee creativity. However, empirical evidence suggested this relationship is complex. This study attempts to address this complexity by proposing and testing a curvilinear mechanism, which attenuates the overall positive effect of LMX on creativity by transmitting a curvilinear indirect effect via vertical task conflict. Results drawn from a sample of 276 supervisor-subordinate dyads provided support for the hypothesized curvilinear indirect effect. Specifically, LMX was found to negatively influence employee creativity by suppressing vertical task conflict for subordinates in high-quality LMX relationships, while the indirect effect was not significant for subordinates in low-quality LMX relationships.

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Section: Introductionmentioning

confidence: 99%

Close relationship with the supervisor may impede employee creativity by suppressing vertical task conflict

Zhang

Zhou

2019

R & D Management

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“…Such a self-reinforcing effect of market dominance is strongly supported by the experimental results. A recent study by Aghion et al (2014), implements the step-by-step model by Aghion et al (2001) in the lab, and finds support for the prediction that the effect of competition on innovation depends on the degree of asymmetry between firms.…”

Section: Research and Developmentmentioning

confidence: 83%

Handbook of Game Theory and Industrial Organization, Volume II

Corchón¹,

Marini²

2018

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“…This suggests that the potential of simultaneity bias, while it cannot be ruled out, might be less concerning. Second, the literature has well acknowledged that competition in non-experimental studies is likely to be endogenous for the parameters of interest (Blundell et al 1999;Aghion et al 2018). Busso and Galiani (2019) provided the first randomised controlled field experiment designed to assess the impact of increasing competition on prices of various goods in the Dominican Republic.…”

Section: Tablementioning

confidence: 99%

Competition and microcredit interest rates: international evidence

Al-Azzam

Parmeter

2019

Empir Econ

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The limited number of existing papers that link competition among microfinance institutions (MFIs) and microcredit interest rates, provide inconclusive and counterintuitive results. This paper uses data from 1997 MFIs operating in 109 countries between the years 2003 and 2016 to construct three measures of competition and evaluate their impacts on interest rates. These measures reflect three different aspects of competition: geographical expansion, market concentration, and the marginal pricing. While the results for market concentration are inconclusive, the results for both geographical expansion and marginal pricing show an economically strong impact of competition on interest rates. Specifically, regardless of whether an MFI is a for-profit or nonprofit, we find meaningful evidence that competition reduces interest rates. Our findings evince that lower interest rates are needed if the microfinance movement is to continue to be relied on as an effective means to alleviate poverty. marginal cost (i.e. the Lerner Index). These measures give different signals on the evolution of competition over time. Although the results for market concentration seem to be inconclusive (but consistent with the nascent literature), the results for the number of branch offices and the Lerner Index show a consistent impact of competition on interest rates; specifically, increased competition reduces interest rates charged by for-profit and nonprofit MFIs.The paper proceeds as follows: Sect. 2 presents the data. Section 3 outlays the empirical model, explains the variables used, and develops alternative measures of competition. Section 4 presents the estimation methods, and Sect. 5 presents the results and discussion. Finally, Sect. 6 presents several concluding thoughts and offers policy recommendations. DataThere are more than 3000 MFIs reporting to the MIX Market. Data for MFIs date back to 1999. The MIX Market classifies MFIs into diamonds according to the availability and quality of data provided by the MFIs. Diamonds range from 1 to 5 where a higher number indicates more transparent and reliable data. To evaluate the overall impact of competition, all MFIs are included regardless of their classifications. To address the quality and availability of data, MFIs with three or less diamonds are also used, and the subsequent results were essentially the same. Data on macroeconomic variables and interest rate ceilings are gathered from the World Bank and Naimbo and Gallegos (2014), respectively.The full data set contains information on 2944 MFIs operating in 122 countries with 17,819 annual observations. Due to some missing values and data trimming, data for 947 MFIs were dropped. Therefore, the final unbalanced sample used in the empirical analysis contains information on 1997 MFIs operating in 109 countries for the period 2003-2016. The breakdown by region is 504 from Latin America and the Caribbean, 322 from South Asia, 420 from Africa, 369 from Eastern Europe and Central Asia, 315 from East Asia and the Pacific, and 67 from the M...

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The Causal Effects of Competition on Innovation: Experimental Evidence

Cited by 52 publications

References 22 publications

Close relationship with the supervisor may impede employee creativity by suppressing vertical task conflict

Close relationship with the supervisor may impede employee creativity by suppressing vertical task conflict

Handbook of Game Theory and Industrial Organization, Volume II

Competition and microcredit interest rates: international evidence

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