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Innovative Activities of an Incumbent and a Potential Entrant: An Empirical Exploration of the Role of Uncertainty in Product and Process Innovations

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  • Hyunbae Chun

    (Department of Economics, Sogang University, Seoul)

  • Sung-Bae Mun

    (Department of Commerce and Finance, Kookmin University, Seoul)

Abstract

By distinguishing between product and process innovations, we empirically examine how uncertainty affects the innovation activities of incumbents and potential entrants. We find that potential entrants are more innovative than are incumbents in both process and product innovations, which supports the patent race model. Further, we find that uncertainty plays a crucial role in hindering an incumbent¡¯s incentive for product innovation, but has little impact on the innovation activities of both incumbents and entrants with respect to process innovation. The results suggest that a higher uncertainty in product innovation can raise the incentive for incumbent firms to seek for cooperation with new entrants.

Suggested Citation

  • Hyunbae Chun & Sung-Bae Mun, 2014. "Innovative Activities of an Incumbent and a Potential Entrant: An Empirical Exploration of the Role of Uncertainty in Product and Process Innovations," Working Papers 1406, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    • Handle: RePEc:sgo:wpaper:1406
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    Keywords

    Attendance; habit-formation; panel data; structural change; baseball;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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