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Process versus Product Innovation in Multiproduct Firms

Author

Listed:
  • Iordanis Petsas

    (Department of Economics and Finance, University of Scranton, U.S.A.)

  • Christos Giannikos

    (Department of Economics and Finance, Baruch College, U.S.A. & Columbia University)

Abstract

This paper develops a differentiated-goods duopoly model in which firms engage in Cournot-Nash quantity competition. The effects of firm size on the choice of R&D effort between process and product innovation are examined. We find that (a) as firms devote more effort to product innovation, given that they are in the product R&D regime, their incentives to switch from product to process innovation increase, and (b) once the firm is in the process R&D regime, it will perform process R&D indefinitely.

Suggested Citation

  • Iordanis Petsas & Christos Giannikos, 2005. "Process versus Product Innovation in Multiproduct Firms," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 4(3), pages 231-248, December.
    • Handle: RePEc:ijb:journl:v:4:y:2005:i:3:p:231-248
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    References listed on IDEAS

    as
    1. Susan Athey & Armin Schmutzler, 1995. "Product and Process Flexibility in an Innovative Environment," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 557-574, Winter.
    2. Cohen, Wesley M & Klepper, Steven, 1996. "Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 232-243, May.
    3. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-583, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Stamatopoulos, Giorgos & Tauman, Yair, 2008. "Licensing of a quality-improving innovation," Mathematical Social Sciences, Elsevier, vol. 56(3), pages 410-438, November.
    2. Antelo, Manel & Bru, Lluís, 2022. "Product licensing in a Stackelberg industry," MPRA Paper 113985, University Library of Munich, Germany.
    3. Tieng Kimseng & Amna Javed & Chawalit Jeenanunta & Youji Kohda, 2020. "Sustaining Innovation through Joining Global Supply Chain Networks: The Case of Manufacturing Firms in Thailand," Sustainability, MDPI, vol. 12(13), pages 1-17, June.
    4. Ma, Xin & McSweeney, Peter, 2008. "Product and process innovation in the food processing industry: case study in Guangxi province," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 16.
    5. Li, Qing & Zhang, Huaige & Hong, Xianpei, 2020. "Knowledge structure of technology licensing based on co-keywords network: A review and future directions," International Review of Economics & Finance, Elsevier, vol. 66(C), pages 154-165.
    6. Zhao, Dan, 2017. "Choices and impacts of cross-licensing contracts," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 389-405.
    7. Cahill, Sean & Rich, Tabitha & Cozzarin, Brian, 2015. "Innovation in the Canadian Food Processing Industry: Evidence from the Workplace and Employee Survey," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 18(2), pages 1-22, May.
    8. Antelo, Manel & Bru, Lluís, 2023. "Licensing a product innovation in a Cournot industry," MPRA Paper 116631, University Library of Munich, Germany.
    9. Huvaj, M. Nesij & Johnson, William C., 2019. "Organizational complexity and innovation portfolio decisions: Evidence from a quasi-natural experiment," Journal of Business Research, Elsevier, vol. 98(C), pages 153-165.

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    More about this item

    Keywords

    multiproduct firms; differentiated goods; product innovation; process innovation;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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