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Competitive Pressure and the Adoption of Complementary InnovationsTobias KretschmerLudwig-Maximilians-Universität Munich - Faculty of Business Administration (Munich School of Management); CESifo (Center for Economic Studies and Ifo Institute for Economic Research) - Ifo Institute for Economic Research; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) Eugenio J. MiraveteUniversity of Texas at Austin; Centre for Economic Policy Research (CEPR) José C. PerníasJaume I University - Department of Economics March 2011 CEPR Discussion Paper No. DP8289 Abstract: 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 working papers seriesDate posted: March 28, 2011Suggested CitationContact Information
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