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on Technology and Industrial Dynamics |
| By: | Jan Bena |
| Abstract: | Using a dynamic model of a step-by-step innovation race between financially constrained firms, I study how financial constraints affect innovation activity. The novel theoretical results derive from an analysis of the interaction between the incentive effect of competition on innovation and the effect competition has on the degree of credit rationing. I find that the negative effect of financial constraints on firm- and aggregate-level R&D investment is most pronounced at both high and low levels of competition. These predictions are supported by empirical evidence: The competition-innovation relationship has an inverted-U shape in less financially developed systems relative to the benchmark pattern observed in countries with highly developed financial systems. Innovation-enhancing policies implemented through competition reforms ought to be complemented by promoting financial development. |
| Keywords: | Innovation, R&D, Competition, Financial constraints, Credit rationing. |
| JEL: | G15 G31 L13 O31 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp377&r=tid |
| By: | André van Stel; Mickey Folkeringa; Sierdjan Koster |
| Abstract: | We investigate the impact of start-up rates on a measure of competition among incumbent firms called mobility. Interactions between new and incumbent firms play an important role in the process of economic growth. While recent literature suggests that competition among incumbent firms is caused by (lagged) start-up rates, this relation has not yet been tested using a direct measure of competition among incumbent firms. In the present paper we estimate a regression model, at the region-sector level for the Netherlands, where the mobility rate is explained by (lagged) startup rates and control variables. Using data for 40 regions and five sectors over the period 1993-2006 we find that the impact of start-ups on mobility varies by sector. In particular, we find a strong positive relation between start-up rates and mobility rates for industry sectors (manufacturing and construction) but a much smaller effect for services sectors. These results suggest there are differences in the types of entry between sectors and in the roles start-ups play in different sectors. |
| Date: | 2009–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:eim:papers:h200905&r=tid |
| By: | André van Stel; Roy Thurik; Dennis Fok; Andrew Burke |
| Abstract: | The relation between profits and the number of firms in a market is one of the essential topics in the field of industrial organization. Usually, the relation is modeled in an error-correction framework where profits and/or the number of firms respond to out-of-equilibrium situations. In an out-of-equilibrium situation one or both of these variables deviate from some long-term sustainable level. These models predict that in situations of equilibrium, the number of firms does not change and hence, entry equals exit. Moreover, in equilibrium entry and exit are expected to be equal to zero. These predictions are at odds with real life observations showing that entry and exit levels are significantly positive in all markets of substantial size. Moreover, entry and exitlevels often differ drastically. In this paper we develop a new model for the relation between profit levels and the number of firms by specifying not only an equation for the equilibrium level of profits in a market but also equations for the equilibrium levels of entry and exit. In our empirical application we show that our entry and exit equations satisfy usual error-correction conditions. We also find that a one-time positive shock to entry or profits has a small but permanent positive effect on both the number of firms and total industry profits. |
| Date: | 2009–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:eim:papers:h200907&r=tid |
| By: | Martin Shubik |
| Date: | 2009–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:814577000000000151&r=tid |