Suchergebnisse

The main objective of this paper is to analyze the links between product market competition, innovation
and growth. We capture the idea that firms innovate in order to try to escape -albeit temporarily - from
the pressure of competition exerted on them by their rivals. There are two ways in which competitive
pressure can be thought of as a driving force to innovate. In leveled industries where all the firms have
access to the same technological knowledge, the greater is the intensity of competition between the neck
by neck firms the lower will be their current profits. Thus, as the competitive pressure increases, these
firms will devote a higher ft&D effort to obtain a leadership and escape from the unprofitable state. In
unleveled industries, where one firm has obtained a technological lead, the greater is the intensity of
competition, the lower will be the current profit of the laggard firm. This should increase the incentive
of this firm to eliminate its disadvantage by catching-up or leapfrogging the current leader. We assume
that if a laggard firm succeeds in innovating, it will either leapfrog the leader with some probability or
catch-up its technology with the complementary probability. The dynamics of industry are thus more
complex than in pure leapfrogging models. By using a quadratic R&D cost function, we investigate
how innovation and growth are affected in the stationary state by the intensity of competition and by
the probability of leapfrogging.