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).
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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)|
|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
|Date Deposited:||24 Mar 2010|
|Last Modified:||27 Mar 2014 19:03|
|Publisher:||University of Southampton|
|RDF:||RDF+N-Triples, RDF+N3, RDF+XML, Browse.|
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