Kiis edificio erices
Competition and innovation
The received literature has studied the various aspects around the relationship between market structure and innovation. The sign and nature of such relationship is not conclusive. Recent work has shown that regional free trade agreements produce asymmetric responses by firms regarding the incentives to innovate. Besides, these incentives are certainly affected by the strength of intellectual property rights protection.
Our objectives are:
  • To study how changes in the intensity of international competition have shaped firms' incentives to innovate. We wish to provide a theoretical and empirical setting in order to analyse how reductions in EU import tariffs have influenced Spanish firms' decisions towards innovation.
  • To investigate the joint effects of property rights protection and intensity of competition on the incentives to innovate.



The paper "The innovation returns to internal and external R&D experience", by Pilar Beneito, Mar�a E. Rochina and Amparo Sanchis, employ a representative sample of Spanish manufacturing firms for 1990-2006 to investigate the influence of firms' internal R&D experience relative to an external one in the achievement of product innovations. The authors find that the experience from in-house engagement in R&D activities is a key driver in such an achievement. External activities do not have an influence in the number of product innovations unless carried along internal R&D activities.

The paper Competition and innovation with selective exit: an inverted U-shape relationship (by P. Beneito, M.E. Rochina and A. Sanchis), forthcoming in Oxford Economic Papers, extends the approach of Aghion et al. (Quarterly Journal of Economics, 2005) to consider the existence of a selective exit effect shaping the relationship between competition and innovation at the industry level. Data of Spanish manufacturing firms from the Survey of Business Strategies (ESEE) spanning 1990-2006, as well as external information on patents from the European Patent Office and US Patent Office are used. Instead of an inverted-U shape, the authors obtain a positive relationship between competition and patents. To explain this positive relationship, the theoretical model of Aghion et al. (2005) is modified to introduce a threat of exit for laggard firms in unlevelled sectors. It is shown that this modified model may explain both an inverted-U shape and a positive relationship between competition and patents. The results support an unambiguous positive relationship linking competition and patents and also a negative relationship between competition and within industry technological gap.

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Researcher in charge: Rafael Moner-Colonques
Facultad de Economía - Campus de Tarongers
Avda. dels Tarongers s/n - 46022 Valencia (SPAIN)
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