| Abstract: |
This paper proposes a model in the spirit of Aghion and al. (2005) that
relates the magnitude of the impact of competition on R&D to the cost of
innovation. The effect of competition on R&D is an inverted U-shape. However,
the shape is flatter and competition policy is therefore less relevant for
innovation when innovations are relatively costly. Intuitively, if innovations
are costly for a firm, competitive shocks have to be significant to alter its
innovation decisions. Empirical investigations using a unique panel dataset
from the Banque de France show that an inverted U-shaped relationship can be
clearly evidenced for the largest firms, but the curve becomes flatter when
the relative cost of R&D increases. For large costs, the relationship even
vanishes. |