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Competition–Innovation Nexus: Product vs. Process, Does It Matter?

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  • Emil Palikot

    (Stanford University, 450 Jane Stanford Way, Stanford, CA 94305, USA)

Abstract

I study the relationship between competition and innovation, focusing on the distinction between product and process innovations. By considering product innovation, I expand upon earlier research on the topic of the relationship between competition and innovation, which focused on process innovations. New products allow firms to differentiate themselves from one another. I demonstrate that the competition level that creates the most innovation incentive is higher for process innovation than product innovation. I also provide empirical evidence that supports these results. Using the community innovation survey, I first show that an inverted U-shape characterizes the relationship between competition and both process and product innovations. The optimal competition level for promoting innovation is higher for process innovation.

Suggested Citation

  • Emil Palikot, 2023. "Competition–Innovation Nexus: Product vs. Process, Does It Matter?," Econometrics, MDPI, vol. 11(3), pages 1-20, August.
    • Handle: RePEc:gam:jecnmx:v:11:y:2023:i:3:p:21-:d:1225355
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    References listed on IDEAS

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