Monday, January 2, 2012

Competition and Persistence of R&D

Posted by D. Daniel Sokol

Martin Woerter, ETH Zurich, Swiss Economic Institute (KOF) has written on Competition and Persistence of R&D.

ABSTRACT: This paper investigates the R&D persistence of R&D active firms in different markets with different intensities of competition, based on firm-level panel data for the period 1996-2008. In a dynamic setting of the empirical model it turns out that persistence is strongly related to market competition (measured by the number of principal competitors). Persistence of R&D expenditures is more likely to be observed in markets with few principal competitors (between 6 and 10) and is very unlikely to be observed in polypolistic type of markets (more than 50 competitors). These results call for a stronger coordination between competition policy and innovation promotion policy, since the former basically aims at larger markets with many competitors, while the latter aims at persistence of R&D efforts and thus markets with fewer competitors.

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