Competition favors the prepared firm: Firms RD responses to competitive market pressure

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This paper aims to contribute to the literature on the long-debated relationship between market competition and firm research and development (R&D) by investigating the effect of competitive market pressure on firms' incentives to invest in R&D. The paper shows that a firm's R&D response to competitive market pressure depends primarily on its level of technological competence or R&D productivity: firms with high levels of technological competence tend to respond aggressively (i.e., exhibit a higher level of R&D efforts) to intensifying competitive market pressure, while firms with low levels of technological competence tend to respond submissively (i.e., exhibit a lower level of R&D efforts). The differential effect of competitive market pressure on firm R&D, conditioned primarily by the level of firms' technological competence, is empirically supported by unique firm-level data from the World Bank. Furthermore, the role of firm-specific technological competence in conditioning the R&D-competition relationship is more evident and statistically more significant for firms facing consumers whose utility is relatively more elastic to product quality than to price. (C) 2009 Elsevier B.V. All rights reserved.
Publisher
ELSEVIER SCIENCE BV
Issue Date
2009-06
Language
English
Article Type
Article
Keywords

TECHNOLOGICAL-OPPORTUNITY; PROCESS INNOVATION; PRODUCT; DETERMINANTS; INTENSITY; BEHAVIOR; EFFICIENCY; PARADIGMS; PATENTS

Citation

RESEARCH POLICY, v.38, no.5, pp.861 - 870

ISSN
0048-7333
DOI
10.1016/j.respol.2009.01.005
URI
http://hdl.handle.net/10203/21986
Appears in Collection
MT-Journal Papers(저널논문)
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