Competitive Pressure and the Adoption of Complementary Innovations

Kretschmer, Tobias; Miravete, Eugenio J.; Pernías, José C.

doi:10.2139/ssrn.1483317

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Competitive Pressure and the Adoption of Complementary Innovations

NET Institute Working Paper No. 09-22

50 Pages Posted: 8 Oct 2009

See all articles by Tobias Kretschmer

Tobias Kretschmer

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management); Centre for Economic Policy Research (CEPR)

Eugenio J. Miravete

University of Texas at Austin; Centre for Economic Policy Research (CEPR)

José C. Pernías

Jaume I University - Department of Economics

There are 2 versions of this paper

Date Written: September 30, 2009

Abstract

Liberalization of the European automobile distribution system in 2002 limits the ability of manufacturers to impose vertical restraints, leading to a substantial restructuring of the industry and increasing the competitive pressure among dealers. We estimate an equilibrium model of profit maximization to evaluate how dealers change their innovation strategies with this regime change. Using French data we evaluate the existence of complementarities among adoptions of innovations and the scale of production. We conclude that as firms expand their scale of production they concentrate their effort in one type of innovation only. Results are robust to the existence of unobserved heterogeneity.

Keywords: Competitive Pressure, Complementarity, Product and Process Innovation.

JEL Classification: C35, L86, O31

Suggested Citation: Suggested Citation

Kretschmer, Tobias and Miravete, Eugenio J. and Pernías, José C., Competitive Pressure and the Adoption of Complementary Innovations (September 30, 2009). NET Institute Working Paper No. 09-22, Available at SSRN: https://ssrn.com/abstract=1483317 or http://dx.doi.org/10.2139/ssrn.1483317