The Effects of Entry on Incumbent Innovation and Productivity

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The Effects of Entry on Incumbent Innovation and Productivity

Show simple item record Aghion, Philippe Richard, Blundell Rachel, Griffith Peter, Howitt Susanne, Prantl 2010-11-15T15:57:09Z 2009
dc.identifier.citation Aghion, Philippe, Richard Blundell, Rachel Griffith, Peter Howitt, and Susanne Prantl. 2009. The effects of entry on incumbent innovation and productivity. Review of Economics and Statistics 91(1): 20-32. en_US
dc.identifier.issn 0034-6535 en_US
dc.identifier.issn 1530-9142 en_US
dc.description.abstract How does firm entry affect innovation incentives in incumbent firms? Microdata suggest that there is heterogeneity across industries. Specifically, incumbent productivity growth and patenting is positively correlated with lagged greenfield foreign firm entry in technologically advanced industries, but not in laggard industries. In this paper we provide evidence that these correlations arise from a causal effect predicted by Schumpeterian growth theory—the threat of technologically advanced entry spurs innovation incentives in sectors close to the technology frontier, where successful innovation allows incumbents to survive the threat, but discourages innovation in laggard sectors, where the threat reduces incumbents' expected rents from innovating. We find that the empirical patterns hold using rich micro panel data for the United Kingdom. We control for the endogeneity of entry by exploiting major European and U.K. policy reforms, and allow for endogeneity of additional factors. We complement the analysis for foreign entry with evidence for domestic entry and entry through imports. en_US
dc.description.sponsorship Economics en_US
dc.language.iso en_US en_US
dc.publisher MIT Press en_US
dc.relation.isversionof doi:10.1162/rest.91.1.20 en_US
dash.license LAA
dc.title The Effects of Entry on Incumbent Innovation and Productivity en_US
dc.type Journal Article en_US
dc.description.version Version of Record en_US
dc.relation.journal Review of Economics and Statistics en_US Aghion, Philippe 2010-11-15T15:57:09Z

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