Competition and Innovation in Product Quality: Theory and Evidence from Turkey

34 Pages Posted: 29 Oct 2012

See all articles by Fatma Karaman

Fatma Karaman

Yasar University

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics

Date Written: October 28, 2012

Abstract

This paper examines how degree of competition affects incentives to innovate in product quality in a symmetric Cournot oligopolistic model. We model product quality in a quality-ladder framework, and find an inverted-U shaped relationship between the number of firms in an industry and R&D efforts in innovation. We test this theoretical prediction using Turkish firm-level data from the Business Environment and Enterprise Performance Survey (BEEPS) and find strong support for it.

Keywords: Product quality, R&D, Competition, Turkey

JEL Classification: O14, O25, D22, D43

Suggested Citation

Karaman, Fatma and Lahiri, Sajal, Competition and Innovation in Product Quality: Theory and Evidence from Turkey (October 28, 2012). Available at SSRN: https://ssrn.com/abstract=2167977 or http://dx.doi.org/10.2139/ssrn.2167977

Fatma Karaman

Yasar University ( email )

DYO Kampusu 364 Sk No:5
Bornova
Izmir, 35500
Turkey

Sajal Lahiri (Contact Author)

Southern Illinois University Carbondale - Department of Economics ( email )

MC 415
1000 Faner Drive
Carbondale, IL 62901
United States

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