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Incremental innovation and competitive pressure in the presence of discrete innovation

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  • Ghosh, Arghya
  • Kato, Takao
  • Morita, Hodaka

Abstract

Technical progress consists of improvements made upon the existing technology (incremental innovation) and innovative activities aiming at entirely new technology (discrete innovation). Incremental innovation is often of limited relevance to the new technology invented by successful discrete innovation. Previous theoretical studies have indicated that higher competitive pressure measured by product substitutability increases incremental innovation. In contrast, we find that intensified competition can decrease incremental innovation. A firm's market share upon its failure in discrete innovation decreases as competition intensifies. This effect decreases firms’ incentives for incremental innovation because the innovation outcome can be applied to a smaller amount of units.

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  • Ghosh, Arghya & Kato, Takao & Morita, Hodaka, 2017. "Incremental innovation and competitive pressure in the presence of discrete innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 135(C), pages 1-14.
    • Handle: RePEc:eee:jeborg:v:135:y:2017:i:c:p:1-14
    DOI: 10.1016/j.jebo.2016.12.022
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    5. Jean-Etienne de Bettignies & Hua Fang Liu & David T. Robinson & Bulat Gainullin, 2023. "Competition and Innovation in Markets for Technology," Management Science, INFORMS, vol. 69(8), pages 4753-4773, August.
    6. Yi-Fan Chen & Alireza Naghavi & Shin-Kun Peng, 2021. "Learning by supplying and competition threat," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(1), pages 121-148, February.
    7. Lingling Suo & Kezhi Yang & Hao Ji, 2023. "The Impact of Technological Mergers and Acquisitions on Enterprise Innovation: A Review," Sustainability, MDPI, vol. 15(17), pages 1-17, August.
    8. Ilke Onur & Magnus Söderberg, 2020. "The impact of regulatory review time on incremental and radical innovation: evidence from the high-risk medical device market," Journal of Regulatory Economics, Springer, vol. 57(2), pages 134-158, April.
    9. Bingqiang Li & Jing Yu & Lei Huang & Jinzhi Li & Changhan Luo, 2021. "Coupling Development of Manufacturing Promotion and Innovation in China," SAGE Open, , vol. 11(4), pages 21582440211, October.
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    More about this item

    Keywords

    Competitive pressure; Incremental innovation; Discrete innovation; Location model; Product substitutability; Technical progress;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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