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Competitive Pressure and the Adoption of Complementary Innovations

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  • Miravete, Eugenio
  • Kretschmer, Tobias
  • Pernías, Jose C

Abstract

Liberalization of the European automobile distribution system in 2002 limits the ability of manufacturers to impose vertical restraints, leading to a substantial increase in competitive pressure among dealers. We estimate an equilibrium model of profit maximization to evaluate how dealers change their innovation adoption strategies following the elimination of exclusive territories. Using French data we evaluate the existence of complementarities between the adoption of software applications and the scale of production. Firms view these innovations as substitutes and concentrate their effort in one type of software as they expand their scale of production. Results are robust to the existence of unobserved heterogeneity.

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  • Miravete, Eugenio & Kretschmer, Tobias & Pernías, Jose C, 2011. "Competitive Pressure and the Adoption of Complementary Innovations," CEPR Discussion Papers 8289, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8289
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    More about this item

    Keywords

    Competitive pressure; Complementarity; Product and process innovation;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • 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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