Competition and Innovation: An Inverted-U Relationship

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Competition and Innovation: An Inverted-U Relationship

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Title: Competition and Innovation: An Inverted-U Relationship
Author: Aghion, Philippe; Howitt, Peter; Griffith, Rachel; Blundell, Richard; Bloom, Nick

Note: Order does not necessarily reflect citation order of authors.

Citation: Aghion, Philippe, Nick Bloom, Richard Blundell, Rachel Griffith, and Peter Howitt. 2005. Competition and innovation: An inverted-U relationship. Quarterly Journal of Economics 120, no. 2: 701-728.
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Abstract: This paper investigates the relationship between product market competition and innovation. We find strong evidence of an inverted-U relationship using panel data. We develop a model where competition discourages laggard firms from innovating but encourages neck-and-neck firms to innovate. Together with the effect of competition on the equilibrium industry structure, these generate an inverted-U. Two additional predictions of the model—that the average technological distance between leaders and followers increases with competition, and that the inverted-U is steeper when industries are more neck-and-neck—are both supported by the data.
Published Version: http://dx.doi.org/10.1162/0033553053970214
Other Sources: http://www.economics.harvard.edu/faculty/aghion/files/comp_and_innov.pdf
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:4481507

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  • FAS Scholarly Articles [6463]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

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