« Resale Price Maintenance in the Post-Leegin World: A Comparative Look at Recent Developments in the United States and European Union | Main | The Microsoft Browser case: Why the Commission's decision fails to convince »
June 22, 2010
Competition and Innovation: Pushing Productivity Up or Down?
Posted by D. Daniel Sokol
Erik Brouwer, Tilburg Law and Economics Center (TILEC) and Henry van der Wiel ask Competition and Innovation: Pushing Productivity Up or Down?
ABSTRACT: This paper examines the relationship between competition, innovation and productivity for the Netherlands. We use industry level data aggregated from micro data as well as moments from firm level data for the period 1996-2006. We match innovation data from Community innovation Survey with accounting data to link innovative activities with performance at the industry level. We find strong evidence for a positive impact of competition on Total Factor Productivity (TFP) at the industry level. Competition directly increases TFP by reducing X-inefficiencies and removing inefficient firms from markets, but also through more innovation. Nonetheless, there exists an inverted U-curve between competition and innovation for the Netherlands, at least for manufacturing industries. Yet, our results indicate that a negative effect of competition on productivity through lower innovation expenditures arises only at very high levels of competition.
June 22, 2010 | Permalink
TrackBack URL for this entry:
Listed below are links to weblogs that reference Competition and Innovation: Pushing Productivity Up or Down?: