Innovation and Market Structure: An Empirical Evaluation of the 'Bounds Approach' in the Chemical Industry

27 Pages Posted: 12 Feb 2002

See all articles by Pedro L. Marin

Pedro L. Marin

Universidad Carlos III de Madrid - Department of Economics; Centre for Economic Policy Research (CEPR)

Georges Siotis

Universidad Carlos III de Madrid - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: January 2002

Abstract

This Paper empirically tests the 'bounds approach' to industry structure proposed by Sutton ((1991), (1998)). To carry out this task, we focus on the chemical industry. Part of the novelty in this exercise is that we work on the finest possible level of disaggregation. Also, we identify demand substitutability from direct industry sources. This allows us to carefully define markets, and identify R&D intensity for each of them. Our empirical specification allows us to simultaneously test the predictions of Sutton (1991) and Sutton (1998). Our results provide strong support to Sutton's theoretical framework.

Keywords: Bounds approach, market structure, innovation, chemical industry

JEL Classification: L11, L65, O31

Suggested Citation

Marin, Pedro L. and Siotis, Georges, Innovation and Market Structure: An Empirical Evaluation of the 'Bounds Approach' in the Chemical Industry (January 2002). Available at SSRN: https://ssrn.com/abstract=299603

Pedro L. Marin (Contact Author)

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34 91 624 9646 (Phone)
+34 91 624 9875 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Georges Siotis

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34 91 624 9312 (Phone)
+34 91 624 9875 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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