Competitive Pressure and the Adoption of Complementary Innovations
Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management); London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)
Eugenio J. Miravete
University of Texas at Austin; Centre for Economic Policy Research (CEPR)
José C. Pernías
Jaume I University - Department of Economics
CEPR Discussion Paper No. DP8289
Liberalization of the European automobile distribution system in 2002 limits the ability of manufacturers to impose vertical restraints, leading to a substantial increase in competitive pressure among dealers. We estimate an equilibrium model of profit maximization to evaluate how dealers change their innovation adoption strategies following the elimination of exclusive territories. Using French data we evaluate the existence of complementarities between the adoption of software applications and the scale of production. Firms view these innovations as substitutes and concentrate their effort in one type of software as they expand their scale of production. Results are robust to the existence of unobserved heterogeneity.
Number of Pages in PDF File: 54
Keywords: Competitive Pressure, Complementarity, Product and Process Innovation
JEL Classification: C35, L86, O31
Date posted: March 28, 2011
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