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Competition and Innovation in Markets for Technology

Author

Listed:
  • Jean-Etienne de Bettignies

    (Smith School of Business, Kingston, Ontario K7L 3N6, Canada)

  • Hua Fang Liu

    (College of Business and Public Management, Kean University, Union, New Jersey 07083)

  • David T. Robinson

    (Fuqua School of Business, Duke University, Durham, North Carolina 27708; National Bureau of Economic Research, Cambridge, Massachusetts 02138)

  • Bulat Gainullin

    (Independent Strategy Consultant)

Abstract

We examine the impact of product market competition on innovation in markets for technology. An innovator makes an investment in quality-improving innovation that can be licensed to one (targeted licensing) or all (market-wide licensing) product market competitors. Our model points to a U-shaped relationship between competition in licensee product markets and innovation in the market for technology: at low levels of competition, market-wide licensing is optimal, and competition reduces innovation, whereas at high levels of competition, targeted licensing is optimal and competition increases innovation. Our empirical analysis using a large panel of U.S. data provides clear support for these predictions linking competition, innovation, and licensing.

Suggested Citation

  • 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.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:8:p:4753-4773
    DOI: 10.1287/mnsc.2022.4574
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    References listed on IDEAS

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