Innovation and competition in a memory process

Correa, Juan A. (2010) Innovation and competition in a memory process. United Kingdom of Great Britain and Northern Ireland, GB, University of Southampton (Discussion Papers in Economics and Econometrics 1005).


Full text not available from this repository.


Does innovation boost or fall with more competition when innovation follows a memory process? This paper provides a theoretical model which analyzes the innovation and competition relationship assuming that innovation follows a short-memory process. I find innovation increases with more product market competition, even under unpriced spillovers. Assuming the probability to innovate increases with past innovations; a follower firm has large incentives to innovate, even in a highly competitive environment, since the memory obtained after innovating increases its probability to innovate again and become a leader. Therefore, industries will be most of the time neck-and-neck where firms innovate to escape from competition. Using the same dataset of Aghion et al. (2005) I also find there is a positive empirical relationship between innovation and competition. In the case of memoryless industries, I show there is no significant relationship between innovation and competition.

Item Type: Monograph (Discussion Paper)
ISSNs: 0966-4246 (electronic)
Related URLs:
Keywords: innovation, R&D, competition, memory process
Subjects: H Social Sciences > HB Economic Theory
Divisions: University Structure - Pre August 2011 > School of Social Sciences > Economics
ePrint ID: 80278
Date Deposited: 24 Mar 2010
Last Modified: 27 Mar 2014 19:03

Actions (login required)

View Item View Item