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Competitive Pressure and Innovation at the Firm Level
Author(s) -
Beneito Pilar,
CoscolláGirona Paz,
RochinaBarrachina María Engracia,
Sanchis Amparo
Publication year - 2015
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12079
Subject(s) - industrial organization , competition (biology) , product (mathematics) , panel data , product innovation , product market , market competition , construct (python library) , product differentiation , economics , new product development , product line , business , microeconomics , econometrics , marketing , engineering , incentive , computer science , cournot competition , manufacturing engineering , market economy , ecology , geometry , mathematics , programming language , biology
This paper provides empirical evidence on the relationship between market competitive pressure and firms' innovation using panel data of Spanish manufacturing firms for 1990–2006. We depart from standard measures of competition, and construct variables capturing the fundamentals of competitive pressure (product substitutability, market size and entry costs) to test the theoretical predictions of V ives [2008, The Journal of Industrial Economics ] for free entry. Our results line up favourably with these predictions. We obtain that greater product substitutability and higher costs of entry lead to more process innovation but less product innovation, whereas market enlargement spurs both product and process innovation.