On Entry and Growth: Theory and Evidence

Aghion, Philippe; Bessonova, Evguenia

doi:10.3917/reof.073.0259

“…Moreover, vertical aid may adversely affect productivity through its impact on competition. That said, the relationship between competition and innovation and, thus, productivity is not clear either, as argued by Aghion and Griffith (2005).…”

Section: Rmfp It = Mmfp It -Mmfp Ftmentioning

confidence: 99%

Vertical Industrial Policy in the EU: An Empirical Analysis of the Effectiveness of State aid

Gual

¹

,

2006

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may State aid: a key tool of industrial policy in the EUThis paper assesses the effectiveness of vertical industrial policies within the EU. For the purpose of this paper, industrial policy is defined as "the set of government interventions that by way of taxes (or subsidies) and regulations on domestic products or factors of production attempt to modify the allocation of domestic resources that results from the free operation of the market" (Gual 1995, p. 9).To narrow down what otherwise is a very broad definition, we exclude measures directed to primary sectors as well as those related to non-tradable industries, such as housing services or retail trade. Policies that affect most firms in a country to a similar extent -for example, investment tax credits or subsidies for the employment of a particular kind of labour -are also excluded.State aid is part of the toolkit available for governments to implement their preferred industrial policy. This toolkit is somewhat limited for EU countries due to the agreements and legislation directed towards creating a single internal market, including a common policy with respect to trade barriers, mutual recognition of standards, and so on. European laws defining the legality of state aid constitute perhaps the most important element in the agreed framework for implementing industrial policies within Europe.The main economic justification for industrial policy, including state aid, is the quest for efficiency. Thus, government aid aims to correct market failures, such as externalities, asymmetric information, market power, coordination problems, and public goods. The most common example of (positive) externalities is the research and development (R&D) activity of private companies. Asymmetric information, in turn, is used as a justification for granting aid to small and medium-sized enterprises (SMEs). Asymmetric information between a bank and an SME about the latter's potential to repay a loan or about the riskiness of its projects may prevent even a profitable SME to access finance.Market failures such as these justify the general objectives of R&D or SME support. Additional arguments are needed, however, to justify government intervention in specific industries or firms. Optimal use of government resources suggests that intervention should focus on those industries where externalities are particularly important. In the case of R&D, general support to all sectors may be desirabl...

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“…On the other hand, the result looks like as a consequence of underinvestment due to the positive externality, quantified here as ∆ ̅ = ( − ′ ) 2 …”

Section: Situation I: Innovation With Technological Leadership and Wimentioning

confidence: 99%

“…In our model it is assumed that (1) IPR may be sold and purchased by means of licensing; (2) there is a market for IPR-based goods ("products"); (3) two initially symmetric incumbents compete a la Cournot in this market; (4) entry to the market is blocked; (5) market players and state regulators know the production costs and market demand, consequently, they know the payoff matrices and can use them to predict the behaviour of each other (but they do not know it determinately) and to choose their own strategy; (6) the costs of negotiations are negligible; (7) an incumbent may invest a fixed amount M in R&D (reducing all costs for process innovation to R&D is used as a simplifying assumption) to put in place completely new or considerably modernized production processes in order to obtain a decrease in the marginal costs of production from c to c' (the investment in R&D always leads to innovation but sometimeswhen another player has already achieved the same innovation and protected her rights-it is impossible to use it; in the case of licensing, the innovation is always used by the innovator itself, if it does not break the exclusive rights of the initial inventor, disregarding any possible transfer of the license to the other market player); (8) the timing of the model is as follows: the participants take simultaneous decisions concerning their licensing policies (i.e. whether they will sell and/or purchase licenses or not, if licensing is available) and their investments in R&D, then they accomplish their innovative projects (if the investment decision is positive), sell and/or purchase licenses (depending on their policies), and in the end they produce, sell and receive the payoffs.…”

Section: The Basic Modelmentioning

confidence: 99%

“…Going further, Aghion and Griffith (2005) provide a detailed set of models connecting innovations and market structure. That discussion until now, from our point of view, may be summarized by the words of Gilbert (2006) also cited by Shapiro (2011): "It is not that we don't have a model of market structure and R&D, but rather that we have many models and it is important to know which model is appropriate for each market context."…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Incentives for Process Innovations Under Discrete Structural Alternatives of Competition Policy

Shastitko

¹

,

Kurdin

²

2015

SSRN Journal

1

0

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in INCENTIVES FOR PROCESS INNOVATIONS UNDER DISCRETE STRUCTURAL ALTERNATIVES OF COMPETITION POLICY 3This study analyses the incentives for process innovations under different conditions determined by the competition policy for intellectual property rights (IPR) and particular features of markets and technologies. Competition policy is defined by the presence or absence of compulsory licensing, markets are characterized by technological leadership or technological competition. The results of modelling show that the uncertainty engendered by technological competition may lower the intensity of innovative activities, if there are no mechanisms of coordination between participants. Voluntary licensing generally improves social welfare but does not guarantee an increase in innovative efforts. Compulsory licensing can impede innovations due to the opportunistic behaviour of market participants but certain measures of state policy can prevent this negative effect. JEL-codes: L24, O31, K21

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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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On Entry and Growth: Theory and Evidence

Cited by 45 publications

References 10 publications

Vertical Industrial Policy in the EU: An Empirical Analysis of the Effectiveness of State aid

Vertical Industrial Policy in the EU: An Empirical Analysis of the Effectiveness of State aid

Incentives for Process Innovations Under Discrete Structural Alternatives of Competition Policy

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

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