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

By P. Tingvall, Andreas Poldahl. 2006

152 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/63b2d7a0b14c6742cf5091d6ab030164f7c0ca30