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An Empirical Test of the Asymmetric Models on Innovative Activity: Who Invests more into R&D, the Incumbent or the Challenger?


Dirk Czarnitzki


Centre for European Economic Research (ZEW); Catholic University of Leuven (KUL)

Kornelius Kraft


University of Dortmund - Department of Economics; Institute for the Study of Labor (IZA)

Journal of Economic Behavior and Organization, Vol. 54, No. 2, pp. 153-173

Abstract:     
We study whether the incumbent or the (potential) entrant invests more into R&D, using data of about 3500 German firms from 1992 to 1995 that explicitly asks firms for their motives in undertaking innovative activity, making it possible to take account intended, not just completed, market entry. We find that challengers invest more into R&D to enter a new market than the incumbents, making the patent racing model by Reinganum and others seem more accurate than the auction model of Gilbert and Newbery. We estimate a tobit model with selectivity to take account of the econometric problem of double censoring.

Keywords: Innovative activity, patent races, uncertainty, incumbent versus entrant, tobit with selectivity

JEL Classification: L12, O31, O32

Accepted Paper Series


Date posted: January 12, 2005  

Suggested Citation

Czarnitzki, Dirk and Kraft, Kornelius, An Empirical Test of the Asymmetric Models on Innovative Activity: Who Invests more into R&D, the Incumbent or the Challenger?. Journal of Economic Behavior and Organization, Vol. 54, No. 2, pp. 153-173. Available at SSRN: http://ssrn.com/abstract=647401

Contact Information

Dirk Czarnitzki (Contact Author)
Centre for European Economic Research (ZEW) ( email )
P.O. Box 10 34 43
Mannheim, 68034
Germany
Catholic University of Leuven (KUL) ( email )
Faculty of Economics and Business
Naamsestraat 69
Leuven, 3000
Belgium
+32 16 326906 (Phone)
+32 16 325799 (Fax)
HOME PAGE: http://www.econ.kuleuven.be/msi/faculty_members.htm
Kornelius Kraft
University of Dortmund - Department of Economics ( email )
D-44221 Dortmund
Germany
+49 231 755-3152 (Phone)
+49 231 755-3155 (Fax)
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Feedback to SSRN (Beta)


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