54 Pages Posted: 28 Mar 2011
Date Written: March 2011
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.
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 (March 2011). CEPR Discussion Paper No. DP8289. Available at SSRN: https://ssrn.com/abstract=1794879
This is a CEPR Discussion Paper. CEPR charges a fee of $5.00 for this paper.Login using your CEPR Personal Profile
File name: DP8289.
If you wish to purchase the right to make copies of this paper for distribution to others, please select the quantity.