IDEAS home Printed from https://ideas.repec.org/a/taf/ecinnt/v15y2006i3p101-118.html
   My bibliography  Save this article

Is there really an inverted U-shaped relation between competition and R&D?

Author

Listed:
  • Patrik Gustavsson Tingvall
  • Andreas Poldahl

Abstract

We test whether predictions of the Aghion et al. (Aghion, P., Bloom, N., Blundell, R., Griffith, R. and Howitt, P. (2004) Competition and Innovation: An Inverted U Relationship. NBER Working Paper series, No. 9269.) model are supported by firm-level data. In particular, we analyze if there is an inverted U-shaped relation between competition and R&D. Results show that the inverted U-shaped relation is supported by the Herfindahl index but not by the price cost margin. Using the Herfindahl index, results suggest that breaking up monopolies increases R&D, whereas further increases in competition most likely lead to reduced R&D. Comparing different estimators, we find that time series-based estimators typically result in less clear-cut results, probably driven by a lack of time series variation in measures of competition.

Suggested Citation

  • 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.
    • Handle: RePEc:taf:ecinnt:v:15:y:2006:i:3:p:101-118
    DOI: 10.1080/10438590500129755
    as

    Download full text from publisher

    File URL: https://www.tandfonline.com/doi/abs/10.1080/10438590500129755
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/10438590500129755?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Tor Jakob Klette, 1999. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Journal of Industrial Economics, Wiley Blackwell, vol. 47(4), pages 451-476, December.
    2. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    3. Keller, Wolfgang, 2000. "Do Trade Patterns and Technology Flows Affect Productivity Growth?," The World Bank Economic Review, World Bank, vol. 14(1), pages 17-47, January.
    4. Rachel Griffith & Stephen Redding & John Van Reenen, 2004. "Mapping the Two Faces of R&D: Productivity Growth in a Panel of OECD Industries," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 883-895, November.
    5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    6. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394, Elsevier.
    7. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    8. Benoît Mulkay & Bronwyn H, Hall & Jacques Mairesse, 2000. "Firm Level Investment and R&D in France and the United States : A Comparison," Working Papers 2000-49, Center for Research in Economics and Statistics.
    9. Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 343-361, July-Aug..
    10. Wolfgang Keller, 2002. "Geographic Localization of International Technology Diffusion," American Economic Review, American Economic Association, vol. 92(1), pages 120-142, March.
    11. repec:bla:jindec:v:47:y:1999:i:4:p:451-76 is not listed on IDEAS
    12. Keller, Wolfgang, 2002. "Trade and the Transmission of Technology," Journal of Economic Growth, Springer, vol. 7(1), pages 5-24, March.
    13. Wolfgang Keller, 1997. "Technology Flows Between Industries: Identification and Productivity Effects," Economic Systems Research, Taylor & Francis Journals, vol. 9(2), pages 213-219.
    14. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    15. repec:bla:econom:v:49:y:1982:i:195:p:277-87 is not listed on IDEAS
    16. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
    17. Blundell, Richard & Griffith, Rachel & Van Reenen, John, 1995. "Dynamic Count Data Models of Technological Innovation," Economic Journal, Royal Economic Society, vol. 105(429), pages 333-344, March.
    18. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-746, August.
    19. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
    20. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    21. William Fellner, 1951. "The Influence of Market Structure on Technological Progress," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 65(4), pages 556-577.
    22. S. W. Davies & Paul A. Geroski, 2000. "Changes In Concentration, Turbulence, And The Dynamics Of Market Shares," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 383-391, August.
    23. Kraft, Kornelius, 1989. "Market Structure, Firm Characteristics and Innovative Activity," Journal of Industrial Economics, Wiley Blackwell, vol. 37(3), pages 329-336, March.
    24. repec:bla:scandj:v:94:y:1992:i:0:p:s29-47 is not listed on IDEAS
    25. Werner Smolny, 2003. "Determinants of innovation behaviour and investment estimates for west-german manufacturing firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(5), pages 449-463.
    26. Geroski, P A, 1990. "Innovation, Technological Opportunity, and Market Structure," Oxford Economic Papers, Oxford University Press, vol. 42(3), pages 586-602, July.
    27. John Scott, 1984. "Firm versus Industry Variability in R&D Intensity," NBER Chapters, in: R&D, Patents, and Productivity, pages 233-248, National Bureau of Economic Research, Inc.
    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. Patrik Gustavsson Tingvall & Patrik Karpaty, 2011. "Service-sector competition, innovation and R&D," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 20(1), pages 63-88.
    2. Gustavsson, Patrik & Poldahl, Andreas, 2003. "Determinants of Firm R&D: Evidence from Swedish Firm Level Data," Working Paper Series 190, Trade Union Institute for Economic Research.
    3. Brouwer, E. & van der Wiel, H.P., 2010. "Competition and Innovation : Pushing Productivity Up or Down?," Discussion Paper 2010-52, Tilburg University, Center for Economic Research.
    4. Brouwer, E. & van der Wiel, H.P., 2010. "Competition and Innovation : Pushing Productivity Up or Down?," Other publications TiSEM 9efe62df-d940-4471-8bc7-e, Tilburg University, School of Economics and Management.
    5. Gong, Guan & Keller, Wolfgang, 2003. "Convergence and polarization in global income levels: a review of recent results on the role of international technology diffusion," Research Policy, Elsevier, vol. 32(6), pages 1055-1079, June.
    6. Poldahl, Andreas, 2004. "Domestic vs. International Spillovers: Evidence from Swedish Firm Level Data," Working Paper Series 200, Trade Union Institute for Economic Research.
    7. Gupta, Kartick & Banerjee, Rajabrata & Onur, Ilke, 2017. "The effects of R&D and competition on firm value: International evidence," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 391-404.
    8. T. Gries & R. Grundmann & I. Palnau & M. Redlin, 2017. "Innovations, growth and participation in advanced economies - a review of major concepts and findings," International Economics and Economic Policy, Springer, vol. 14(2), pages 293-351, April.
    9. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
    10. Jakob B. Madsen & Md. Rabiul Islam & James B. Ang, 2010. "Catching up to the technology frontier: the dichotomy between innovation and imitation," Canadian Journal of Economics, Canadian Economics Association, vol. 43(4), pages 1389-1411, November.
    11. Harris, Richard & Moffat, John, 2011. "Plant-level determinants of total factor productivity in Great Britain, 1997-2006," LSE Research Online Documents on Economics 33561, London School of Economics and Political Science, LSE Library.
    12. Brita Bye & Taran Fæhn & Leo A. Grünfeld, 2008. "Growth policy in a small, open economy. Domestic innovation and learning from abroad," Discussion Papers 572, Statistics Norway, Research Department.
    13. Damijan, Jože P. & Kostevc, Crt, 2007. "Knowledge Transfer, Innovation and Growth," Papers DYNREG06, Economic and Social Research Institute (ESRI).
    14. Jan Van Hove, 2008. "The Impact of R&D Spillovers on Export Value: Does the Transmission Channel matter?," Working Papers 2008.3, International Network for Economic Research - INFER.
    15. Thomas Strobel, 2012. "New evidence on the sources of EU countries’ productivity growth—industry growth differences from R&D and competition," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 39(3), pages 293-325, August.
    16. MARSCHINSKI Robert & DE AMORES HERNANDEZ Antonio & AMOROSO Sara & BAUER Peter & CARDANI Roberta & CSEFALVAY Zoltan & GENTY Aurelien & GKOTSIS Petros & GREGORI Wildmer & GRASSANO Nicola & HERNANDEZ GUE, 2021. "EU competitiveness: recent trends, drivers, and links to economic policy: A Synthesis Report," JRC Research Reports JRC123232, Joint Research Centre.
    17. Keller, Wolfgang, 2010. "International Trade, Foreign Direct Investment, and Technology Spillovers," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 793-829, Elsevier.
    18. Karl Aiginger, 2008. "The Impact of Competition on Macroeconomic Performance," Chapters, in: Klaus Gugler & B. Burcin Yurtoglu (ed.), The Economics of Corporate Governance and Mergers, chapter 14, Edward Elgar Publishing.
    19. Okada, Yosuke, 2005. "Competition and productivity in Japanese manufacturing industries," Journal of the Japanese and International Economies, Elsevier, vol. 19(4), pages 586-616, December.
    20. Andreas Poldahl, 2006. "Domestic vs. International Spillovers: Evidence from Swedish Firm Level Data," Journal of Industry, Competition and Trade, Springer, vol. 6(3), pages 277-294, December.

    More about this item

    Keywords

    R&D; Competition; Firm size; Spillovers;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

    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:taf:ecinnt:v:15:y:2006:i:3:p:101-118. 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: Chris Longhurst (email available below). General contact details of provider: https://www.tandfonline.com/GEIN20 .

    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.