Competitive Pressure: The Effects on Investments in Product and Process Innovation

Boone, Jan

doi:10.2307/2601000

Cited by 221 publications

(164 citation statements)

References 17 publications

(17 reference statements)

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“…The falling productivity of frontier firms is an additional cost of protection emerging from this paper that adds to the loss in domestic consumer surplus and the sub-optimal levels of exit. These empirical results are consistent with recent theoretical findings that have pointed at the relationship between market size (Lileeva and Trefler, 2007), product market competition (Aghion et al 2005, Boone, 2000, temporary tariff protection and the adoption speed of new technology (Miyagiwa and Ohno, 1995;Ederington and McCalman, 2007). An interesting future line of research would be to engage in more in depth industry studies to explore the channels through which productivity changes at the firmlevel in response to trade policy are made.…”

supporting

confidence: 91%

“…4 Finally, our results can also be usefully compared to recent work by Aghion et al (2005) who showed that a reduction in product market competition reduces the technology gap in an industry. Also, Boone (2000) shows that when firms operate under weak product market competition, the incentive to innovate in such markets is stronger for less efficient firms. The intuition underlying this result is that with weak competition, strategic effects between firms are smaller than under tough competition.…”

Section: Introductionmentioning

confidence: 99%

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Heterogeneous responses of firms to trade protection

Konings

Vandenbussche

2008

Journal of International Economics

112

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Heterogeneous Responses of Firms to Trade ProtectionThis paper uses EU firm-level panel data to estimate the effect of Antidumping (AD) protection on the productivity of EU domestic firms in import-competing industries. We find that firms with relatively low initial productivity -laggard firms -have productivity gains during AD protection, while firms with high initial productivity -frontier firms -experience productivity losses. While the productivity of the average firm is moderately improved during AD protection, productivity remains below that of firms never involved in AD cases, thus questioning the desirability of protection. Our empirical results are consistent with recent theoretical work supporting the view that trade policy can have a differential effect on firms depending on their initial productivity.JEL Classification: 030, C2, F13 and L41

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supporting

confidence: 91%

Section: Introductionmentioning

confidence: 99%

Heterogeneous responses of firms to trade protection

Konings

Vandenbussche

2008

Journal of International Economics

112

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“…For example, Boone (2000) …nds that when competition is weak, the incentives of less e¢ cient …rms to innovate increase. However, when competition becomes more intense, the incentives of e¢ cient …rms to innovate grow.…”

Section: Introductionmentioning

confidence: 99%

Innovation or imitation? The effect of spillovers and competitive pressure on firms’ R&D strategy choice

Slivko

Theilen

2013

J. Econ.

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This article provides a theoretical and empirical analysis of a …rm's optimal R&D strategy choice. In this paper a …rm's R&D strategy is assumed to be endogenous and allowed to depend on both internal …rms' characteristics and external factors. Firms choose between two strategies, either they engage in R&D or abstain from own R&D and imitate the outcomes of innovators. In the theoretical model this yields three types of equilibria in which either all …rms innovate, some …rms innovate and others imitate, or no …rm innovates. Firms'equilibrium strategies crucially depend on external factors. We …nd that the e¢ ciency of intellectual property rights protection positively a¤ects …rms'incentives to engage in R&D, while competitive pressure has a negative e¤ect. In addition, smaller …rms are found to be more likely to become imitators when the product is homogeneous and the level of spillovers is high. These results are supported by empirical evidence for German …rms from manufacturing and services sectors.Regarding social welfare our results indicate that strengthening intellectual property protection can have an ambiguous e¤ect. In markets characterized by a high rate of innovation a reduction of intellectual property rights protection can discourage innovative performance substantially. However, a reduction of patent protection can also increase social welfare because it may induce imitation. This indicates that policy issues such as the optimal length and breadth of patent protection cannot be resolved without taking into account speci…c market and …rm characteristics.Journal of Economic Literature Classi…cation Numbers: C35, D43, L13, L22, O31.

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“…Two concurrent views have emerged in this respect. According to one stream of literature, under increased competition companies close to the technology frontier are incentivized to innovate and to increase performance; the opposite holds for laggard companies that, regardless what they do, expect to loose market to more efficient entrants (Boone 2000, Aghion et al 2005. The corporate governance literature indicates that the efficiency level of a firm, at its turn, depends on the ownership structure (see the survey of Lawriwsky 1984).…”

Section: Introductionmentioning

confidence: 99%

Competition, ownership and productivity. A panel analysis of Czech firms

Baghdasaryan

Cour

2013

Journal of Economics and Business

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This study empirically investigates if competition's impact on firm performance depends on the ownership structure. Our results show that an increase in import competition has a positive effect on firms with concentrated ownership and a negative effect on firms with dispersed ownership, regardless of the level of domestic competition. Given that the optimal level of ownership concentration with respect to firm productivity is high (low) if tariffs are low (high) in the case when import competition is high these results are consistent with theoretical findings that competition has positive effects in companies that are a priori efficient but not in unproductive firms. If tariffs are high, however, they support inferences based on the x-inefficiency literature. Contrary to what has been suggested by some theoretical results, the riskiness of a firm's environment does not seem to influence our results. JEL: D24, F10

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Competitive Pressure: The Effects on Investments in Product and Process Innovation

Cited by 221 publications

References 17 publications

Heterogeneous responses of firms to trade protection

Heterogeneous responses of firms to trade protection

Innovation or imitation? The effect of spillovers and competitive pressure on firms’ R&D strategy choice

Competition, ownership and productivity. A panel analysis of Czech firms

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