Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Wednesday, December 3, 2008

The Effects of Competition on Investment - Towards a Taxonomy

Posted by D. Daniel Sokol

Armin Schmutzler, University of Zurich - Socioeconomic Institute (SOI) writes on The Effects of Competition on Investment - Towards a Taxonomy.

ABSTRACT: Using a general two-stage framework, this paper gives sufficient conditions for increasing competition to have negative or positive effects on R&D-investment, respectively. Both possibilities arise in plausible situations, even if one uses relatively narrow concepts of increasing competition. The paper also shows that competition is more likely to increase the investments of leaders than those of laggards. When R&D-spillovers are strong, competition is less likely to increase investments. The paper also identifies conditions under which low initial levels of competition make a positive effects of competition on investment more likely.

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