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Does competition spur innovation? The case of yardstick competition

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  • Lefouili, Yassine

Abstract

This paper investigates the effect of yardstick competition on firms’ incentives to invest in cost-reducing innovations. We show that an increase in the intensity of yardstick competition, for which we provide a natural measure, increases the incentives to innovate.

Suggested Citation

  • Lefouili, Yassine, 2015. "Does competition spur innovation? The case of yardstick competition," Economics Letters, Elsevier, vol. 137(C), pages 135-139.
    • Handle: RePEc:eee:ecolet:v:137:y:2015:i:c:p:135-139
    DOI: 10.1016/j.econlet.2015.10.033
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    References listed on IDEAS

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    1. Tangeras, Thomas P., 2002. "Collusion-proof yardstick competition," Journal of Public Economics, Elsevier, vol. 83(2), pages 231-254, February.
    2. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    3. Andrei Shleifer, 1985. "A Theory of Yardstick Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 319-327, Autumn.
    4. Gilbert Richard J, 2006. "Competition and Innovation," Journal of Industrial Organization Education, De Gruyter, vol. 1(1), pages 1-23, December.
    5. Dag Morten Dalen, 1998. "Yardstick Competition and Investment Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 105-126, March.
    6. Raymond De Bondt & Jan Vandekerckhove, 2012. "Reflections on the Relation Between Competition and Innovation," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 7-19, March.
    7. Richard Gilbert, 2006. "Looking for Mr. Schumpeter: Where Are We in the Competition-Innovation Debate?," NBER Chapters, in: Innovation Policy and the Economy, Volume 6, pages 159-215, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Daragh O'Leary & Justin Doran & Bernadette Power, 2022. "Intensity of competition and firm innovative behavior," Economics and Business Letters, Oviedo University Press, vol. 11(2), pages 53-69.
    2. Nicos Savva & Tolga Tezcan & Özlem Yıldız, 2019. "Can Yardstick Competition Reduce Waiting Times?," Management Science, INFORMS, vol. 65(7), pages 3196-3215, July.
    3. Pratyush Bharati & Abhijit Chaudhury, 2019. "Assimilation of Big Data Innovation: Investigating the Roles of IT, Social Media, and Relational Capital," Information Systems Frontiers, Springer, vol. 21(6), pages 1357-1368, December.

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    More about this item

    Keywords

    Competition and innovation; Yardstick competition; Cost reduction;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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