IDEAS home Printed from https://ideas.repec.org/p/unm/unumer/2015001.html
   My bibliography  Save this paper

How does firms' perceived competition affect technological innovation in Luxembourg?

Author

Listed:
  • Raymond W.
  • Plotnikova T.

    (UNU-MERIT)

Abstract

This paper revisits the competition-innovation relationship using an unbalanced panel of enterprise data stemming from four waves of the Luxembourgish innovation survey for the period 2002-2010. We estimate by full-information maximum likelihood a nonlinear dynamic simultaneous-equations model with pseudo-fixed effects using four measures of perceived competition and three indicators of innovation and find that firms whose main market is characterised by rapid obsolescence of products are more likely to spend on innovation and to introduce product or process innovations. We also find that these firms also often consider their main market to be characterised by rapidly-changing technologies where higher competition also implies higher innovation.

Suggested Citation

  • Raymond W. & Plotnikova T., 2015. "How does firms' perceived competition affect technological innovation in Luxembourg?," MERIT Working Papers 2015-001, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2015001
    as

    Download full text from publisher

    File URL: https://unu-merit.nl/publications/wppdf/2015/wp2015-001.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Cefis, Elena & Orsenigo, Luigi, 2001. "The persistence of innovative activities: A cross-countries and cross-sectors comparative analysis," Research Policy, Elsevier, vol. 30(7), pages 1139-1158, August.
    2. Gilbert Richard J, 2006. "Competition and Innovation," Journal of Industrial Organization Education, De Gruyter, vol. 1(1), pages 1-23, December.
    3. Majd, Saman & Pindyck, Robert S., 1987. "Time to build, option value, and investment decisions," Journal of Financial Economics, Elsevier, vol. 18(1), pages 7-27, March.
    4. Xulia González & Jordi Jaumandreu & Consuelo Pazo, 2005. "Barriers to Innovation and Subsidy Effectiveness," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 930-949, Winter.
    5. Bonanno, Giacomo & Haworth, Barry, 1998. "Intensity of competition and the choice between product and process innovation," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 495-510, July.
    6. Veugelers, Reinhilde & Cassiman, Bruno, 2004. "Foreign subsidiaries as a channel of international technology diffusion: Some direct firm level evidence from Belgium," European Economic Review, Elsevier, vol. 48(2), pages 455-476, April.
    7. Carl A. Futia, 1980. "Schumpeterian Competition," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(4), pages 675-695.
    8. Seru, Amit, 2014. "Firm boundaries matter: Evidence from conglomerates and R&D activity," Journal of Financial Economics, Elsevier, vol. 111(2), pages 381-405.
    9. Bettina Peters, 2009. "Persistence of innovation: stylised facts and panel data evidence," The Journal of Technology Transfer, Springer, vol. 34(2), pages 226-243, April.
    10. Greenwald, Bruce & Stiglitz, Joseph E & Weiss, Andrew, 1984. "Informational Imperfections in the Capital Market and Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 74(2), pages 194-199, May.
    11. Jan Boone, 2008. "A New Way to Measure Competition," Economic Journal, Royal Economic Society, vol. 118(531), pages 1245-1261, August.
    12. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    13. David, Paul A. & Hall, Bronwyn H. & Toole, Andrew A., 2000. "Is public R&D a complement or substitute for private R&D? A review of the econometric evidence," Research Policy, Elsevier, vol. 29(4-5), pages 497-529, April.
    14. Patrik Gustavsson Tingvall & Andreas Poldahl, 2006. "Is there really an inverted U-shaped relation between competition and R&D?," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(3), pages 101-118.
    15. Roper, Stephen & Hewitt-Dundas, Nola, 2008. "Innovation persistence: Survey and case-study evidence," Research Policy, Elsevier, vol. 37(1), pages 149-162, February.
    16. Chiara Peroni & Ivete Ferreira, 2012. "Competition and Innovation in Luxembourg," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 93-117, March.
    17. Meyer-Krahmer, Frieder & Reger, Guido, 1999. "New perspectives on the innovation strategies of multinational enterprises: lessons for technology policy in Europe," Research Policy, Elsevier, vol. 28(7), pages 751-776, September.
    18. Flaig, Gebhard & Stadler, Manfred, 1994. "Success Breeds Success. The Dynamics of the Innovation Process," Empirical Economics, Springer, vol. 19(1), pages 55-68.
    19. Rajshree Agarwal & David B. Audretsch, 2001. "Does Entry Size Matter? The Impact of the Life Cycle and Technology on Firm Survival," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 21-43, March.
    20. Anker Lund Vinding, 2006. "Absorptive capacity and innovative performance: A human capital approach," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(4-5), pages 507-517.
    21. Richard Gilbert, 2006. "Looking for Mr. Schumpeter: Where Are We in the Competition-Innovation Debate?," NBER Chapters, in: Innovation Policy and the Economy, Volume 6, pages 159-215, National Bureau of Economic Research, Inc.
    22. Jan Boone & Jan Ours & Henry Wiel, 2013. "When is the Price Cost Margin a Safe Way to Measure Changes in Competition?," De Economist, Springer, vol. 161(1), pages 45-67, March.
    23. Hall, Bronwyn H & Griliches, Zvi & Hausman, Jerry A, 1986. "Patents and R and D: Is There a Lag?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 265-283, June.
    24. Jan Boone, 2008. "A New Way to Measure Competition," Economic Journal, Royal Economic Society, vol. 118(531), pages 1245-1261, August.
    25. Manne,Geoffrey A. & Wright,Joshua D. (ed.), 2011. "Competition Policy and Patent Law under Uncertainty," Cambridge Books, Cambridge University Press, number 9780521766746, January.
    26. Michael Polder & Erik Veldhuizen, 2012. "Innovation and Competition in the Netherlands: Testing the Inverted-U for Industries and Firms," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 67-91, March.
    27. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    28. Michael Peneder, 2012. "Competition and Innovation: Revisiting the Inverted-U Relationship," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 1-5, March.
    29. Granstrand, Ove & Hakanson, Lars & Sjolander, Soren, 1993. "Internationalization of R&D -- a survey of some recent research," Research Policy, Elsevier, vol. 22(5-6), pages 413-430, November.
    30. Sudipto Bhattacharya & Jay R. Ritter, 1983. "Innovation and Communication: Signalling with Partial Disclosure," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(2), pages 331-346.
    31. Juan A. Máñez & María E. Rochina‐Barrachina & Amparo Sanchis & Juan A. Sanchis, 2009. "The Role Of Sunk Costs In The Decision To Invest In R&D," Journal of Industrial Economics, Wiley Blackwell, vol. 57(4), pages 712-735, December.
    32. Levin, Richard C & Cohen, Wesley M & Mowery, David C, 1985. "R&D Appropriability, Opportunity, and Market Structure: New Evidence on Some Schumpeterian Hypotheses," American Economic Review, American Economic Association, vol. 75(2), pages 20-24, May.
    33. Tang, Jianmin, 2006. "Competition and innovation behaviour," Research Policy, Elsevier, vol. 35(1), pages 68-82, February.
    34. Scott J. Wallsten, 2000. "The Effects of Government-Industry R&D Programs on Private R&D: The Case of the Small Business Innovation Research Program," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 82-100, Spring.
    35. Charles Bérubé & Marc Duhamel & Daniel Ershov, 2012. "Market Incentives for Business Innovation: Results from Canada," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 47-65, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roberto Alvarez & Rolando Campusano, 2014. "Does Competition Spur Innovation in Developing Countries?," Working Papers wp388, University of Chile, Department of Economics.
    2. Juan Pablo Herrera Saavedra & Ginette Sofía Lozano Maturana & Jacobo Campo Robledo & Alejandra Catalina Parra Ochoa, 2019. "Competition policy and Industrial property: relationship through panel data approach 2007 – 2015," Estudios Económicos SIC 17720, Superintendencia de Industria y Comercio.
    3. Juan Máñez & María Rochina-Barrachina & Amparo Sanchis-Llopis & Juan Sanchis-Llopis, 2015. "The determinants of R&D persistence in SMEs," Small Business Economics, Springer, vol. 44(3), pages 505-528, March.
    4. Bettina Becker, 2013. "The Determinants of R&D Investment: A Survey of the Empirical Research," Discussion Paper Series 2013_09, Department of Economics, Loughborough University, revised Sep 2013.
    5. Tammi, Timo & Saastamoinen, Jani & Reijonen, Helen, 2020. "Public procurement as a vehicle of innovation – What does the inverted-U relationship between competition and innovativeness tell us?," Technological Forecasting and Social Change, Elsevier, vol. 153(C).
    6. Hashem, Nawar & Ugur, Mehmet, 2012. "Market Concentration, Corporate Governance and Innovation: Partial and Combined Effects in US-Listed Firms," MPRA Paper 44135, University Library of Munich, Germany, revised Sep 2012.
    7. Ugur, Mehmet, 2012. "Market Power, Governance and Innovation: OECD Evidence," MPRA Paper 44141, University Library of Munich, Germany.
    8. Guidi, Francesco & Solomon, Edna & Trushin, Eshref & Ugur, Mehmet, 2015. "Inverted-U relationship between innovation and survival: Evidence from firm-level UK data," EconStor Preprints 110896, ZBW - Leibniz Information Centre for Economics.
    9. Hanna Hottenrott & Bettina Peters, 2012. "Innovative Capability and Financing Constraints for Innovation: More Money, More Innovation?," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1126-1142, November.
    10. Pilar BeneitoBy & María Engracia Rochina-Barrachina & Amparo Sanchis, 2017. "Competition and innovation with selective exit: an inverted-U shape relationship?," Oxford Economic Papers, Oxford University Press, vol. 69(4), pages 1032-1053.
    11. Mehmet Ugur, 2013. "Governance, market power and innovation: evidence from OECD countries," Chapters, in: Mehmet Ugur (ed.), Governance, Regulation and Innovation, chapter 2, pages 25-57, Edward Elgar Publishing.
    12. Michael Peneder & Martin Woerter, 2014. "Competition, R&D and innovation: testing the inverted-U in a simultaneous system," Journal of Evolutionary Economics, Springer, vol. 24(3), pages 653-687, July.
    13. Huergo, Elena & Trenado, Mayte & Ubierna, Andrés, 2016. "The impact of public support on firm propensity to engage in R&D: Spanish experience," Technological Forecasting and Social Change, Elsevier, vol. 113(PB), pages 206-219.
    14. Pere Arqué-Castells, 2013. "Persistence in R&D Performance and its Implications for the Granting of Subsidies," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(3), pages 193-220, November.
    15. Ganter, Alois & Hecker, Achim, 2013. "Persistence of innovation: Discriminating between types of innovation and sources of state dependence," Research Policy, Elsevier, vol. 42(8), pages 1431-1445.
    16. Rut Atayde & Rafael Garduño & Eduardo Robles & Pluvia Zúñiga, 2021. "Market competition and firm productivity and innovation: Responses in Mexican manufacturing industries," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(4), pages 1185-1214, August.
    17. Olga Slivko & Bernd Theilen, 2014. "Innovation or imitation? The effect of spillovers and competitive pressure on firms’ R&D strategy choice," Journal of Economics, Springer, vol. 112(3), pages 253-282, July.
    18. Tavassoli, Sam & Karlsson, Charlie, 2015. "Persistence of various types of innovation analyzed and explained," Research Policy, Elsevier, vol. 44(10), pages 1887-1901.
    19. Raymond, Wladimir & Mairesse, Jacques & Mohnen, Pierre & Palm, Franz, 2015. "Dynamic models of R & D, innovation and productivity: Panel data evidence for Dutch and French manufacturing," European Economic Review, Elsevier, vol. 78(C), pages 285-306.
    20. Benavente, José Miguel & Zuñiga, Pluvia, 2022. "How Does Market Competition Affect Firm Innovation Incentives in Emerging Countries? Evidence from Chile and Colombia," IDB Publications (Working Papers) 12198, Inter-American Development Bank.

    More about this item

    Keywords

    Multiple or Simultaneous Equation Models; Panel Data; Longitudinal Data; Spatial Time Series; Multiple or Simultaneous Equation Models; Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Innovation and Invention; Management of Technological Innovation and R&D; Technological Change; Government Policy;
    All these keywords.

    JEL classification:

    • 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
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unm:unumer:2015001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ad Notten (email available below). General contact details of provider: https://edirc.repec.org/data/meritnl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.