Premium
New evidence on innovation and market structure
Author(s) -
Jadlow Joseph M.
Publication year - 1981
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090020205
Subject(s) - incentive , monopoly , market structure , economics , sample (material) , market concentration , industrial organization , arrow , empirical evidence , microeconomics , philosophy , chemistry , epistemology , chromatography , computer science , programming language
Arrow and Demsetz have disagreed on theoretical grounds as to whether the incentive to invent is likely to be greater in a competitive industry or a monopoly one. Past empirical studies of the relationship between the rate of innovation and market structure have suggested that innovation occurs at a faster rate within a competitive market structure. This paper employs more detailed data and a larger sample of markets than have most previous studies of this relationship. Using a sales‐weighted measure of innovation, the paper finds a positive and statistically significant relationship between the overall rate of innovation In individual markets and the level of seller concentration. This implies that public policy which reduces concentration may, through its impact on incentives, have the side effect of reducing the rate of innovation in the markets involved.