Dynamic Competition in Technological Investments: An Empirical Examination of the LCD Panel Industry
35 Pages Posted: 24 Jul 2009 Last revised: 24 Jul 2012
Date Written: August 2010
When are technological laggards more likely to try to catch up with leaders? We offer empirical evidence on firm-level data of plant investments in the TFT-LCD panel industry, where technological competition has been intense and dynamic. We find that the followers' level of technology has a non-monotonic effect on technology-improving investments, with intermediate followers the most apt to invest in catch-ups. This result is a puzzle given the existing theory on technology race. We also find that followers' catch-up investments increase with the capacity of the leader that employs the state-of-the-art technology. These results are robust to variations in specification and alternative accounts of effects. We discuss our findings and contributions in light of the technology race literature.
Keywords: LCD industry, Technology race, Leadership competition, Innovation, Catch-up investment, Firm heterogeneity
JEL Classification: D21, L13, L63, O31, O32, O33
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