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| Author: | Bonanno, G. Haworth, B. |
| Title: | Intensity of competition and the choice between product and process innovation |
| Journal: | International Journal of Industrial Organization
1998 : JUL, VOL. 16:4, p. 495-510 |
| Index terms: | Products Innovation Competition |
| Freeterms: | Vertical differentation |
| Language: | eng |
| Abstract: | Two questions are examined within a model of vertical differentiation. The first is whether cost-reducing innovations are more likely to be observed in regimes of more intense (Bertrand) or less intense (Cournot) competition. It is found that there are cost-reducing innovations that are pursued under Cournot but not under Bertrand competition. The second is whether the regime of competition affects a firm's choice btw. product and process innovation. It is shown in the paper that for the high quality firm, whenever there is a difference between the choice made by a Bertrand competitor and the choice made by a Cournot competitor, the former opts for product innovation, while the latter prefers process innovation. For the low-quality firm the result is reversed. |
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