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Product and Process Innovations in a Horizontally Differentiated Product Market

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  • Pia Weiß

Abstract

For horizontal product differentiation, the paper examines the effects of the level of competition on the firm's decision between a product and process innovation. When firms have to choose between the two types of innovation, it is demonstrated that both firms undertake the product innovation when the competition is intense, they choose different investment projects in intermediate competition, and they pursue cost--reducing innovations when competition is less intense. If firms may pursue both innovations, they mix the types depending on the innovation cost structure. Again, firms incur higher costs into product innovations, when the competition is initially intense.

Suggested Citation

  • Pia Weiß, 2001. "Product and Process Innovations in a Horizontally Differentiated Product Market," IWP Discussion Paper Series 07/2001, Institute for Economic Policy, Cologne, Germany.
    • Handle: RePEc:kln:iwpdip:dp07/01
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Product innovation; Process innovation; Horizontal product differentiation;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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