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Legal Enforcements for Competition Policy

In: Information Agglomeration of Japanese Auto Parts Suppliers

Author

Listed:
  • Yosuke Takeda

    (Aichi University)

  • Ichihiro Uchida

    (Aichi University)

Abstract

Do legal enforcementsLegal enforcement for competition policyCompetition policy have differential effects on innovative research and development (R&D)Research & development (R&D) activities? Considering both strategic R&D competitionCompetition between incumbents and entrants, and the government’s optimal choice of legal schemes, we first present a game-theoretic model of innovationInnovation and legal enforcementLegal enforcement (Glaeser and Shleifer, Journal of Economic Literature 41:401–425, 2003; Schwartzstein and Shleifer, Journal of Law and Economics 56:1–38, 2013; Segal and Whinston, American Economic Review 97:1703–1730, 2007). The model suggests that there are in subgame-perfect equilibriaSubgame-perfect equilibrium (equilibria) some relations concerning average treatment effects of legal enforcementLegal enforcement on the entrant’s R&D or incumbent’s deterrence activities, conditional on the law and orderLaw and order degree in the host country (World Bank Worldwide Governance IndicatorsWorldwide Governance Indicators). Second, focusing on overseas subsidiariesOverseas subsidiaries (subsidiary) of Japanese auto-parts suppliersJapanese auto-parts supplier(s) that have international deployments with different legal origins in locations, we use a pooled data set of the Basic Survey of Overseas Business ActivitiesBasic Survey of Overseas Business Activities and the Basic Survey of Japanese Business Structure and ActivitiesBasic Survey of Japanese Business Structure and Activities. The average multi-valued treatment effectAverage (multi-valued) treatment effect (ATE) estimation shows positive results for the model. It suggests that under regulationRegulation as a legal enforcementLegal enforcement scheme instead of strict liabilityStrict liability or negligenceNegligence, even in countries with a low degree of law and orderLaw and order, R&D activities would be more enhanced and R&D-deterrent ones be further suppressed on an average. Legal enforcementLegal enforcement for competition policyCompetition policy does matter for innovationInnovation.

Suggested Citation

  • Yosuke Takeda & Ichihiro Uchida, 2024. "Legal Enforcements for Competition Policy," Springer Books, in: Information Agglomeration of Japanese Auto Parts Suppliers, chapter 0, pages 109-129, Springer.
    • Handle: RePEc:spr:sprchp:978-981-19-3300-4_5
    DOI: 10.1007/978-981-19-3300-4_5
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