Journal article

The Causal Effects of Competition on Innovation : Experimental Evidence

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  • The Journal of Law, Economics, and Organization. - Oxford University Press. - 2018, vol. 34, no. 2, p. 162-195
English We design two laboratory experiments to analyze the causal effects of competition on step-by-step innovation. Innovations result from costly R&D investments and move technology up one step. Competition is inversely measured by the ex post rents for firms that operate at the same technological level, i.e. for neck-and-neck firms. First, we find that increased competition leads to a significant increase in R&D investments by neck-and-neck firms. Second, increased competition decreases R&D investments by firms that are lagging behind, in particular if the time horizon is short. Third, we find that increased competition affects industry composition by reducing the fraction of sectors where firms are neck-and-neck. All these results are consistent with the predictions of step-by-step innovation models.
Faculté des sciences économiques et sociales et du management
Département d'économie politique
  • English
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