Competition and Innovation Revisited: A Product-Level View

79 Pages Posted: 1 Oct 2020 Last revised: 28 Nov 2022

See all articles by Jon A. Garfinkel

Jon A. Garfinkel

University of Iowa - Tippie College of Business

Mosab Hammoudeh

California State University, Fullerton - College of Business and Economics

Date Written: November 20, 2020

Abstract

We offer a first-ever direct test of the mechanism behind Aghion et al.’s (2005) inverted-U competition-innovation relationship. FDA awards of Breakthrough Therapy Designations (BTDs) on drugs serve as instruments for stochastic shifts in their model between neck-and-neck and unleveled status of that drug’s product (therapeutic) market. Rivals’ development hazards on their shocked projects – their innovation – increase when the shocked market is ex-ante less competitive, and vice-versa. We highlight several drivers of rival responses underlying the inverted-U, including high exposure to the shocked market, as well as rival usage of other-BTD methods-of-action (technologies).

Keywords: Competition, Product Markets, Innovation, Peer Effects, Breakthrough, Pharmaceutical Innovation

JEL Classification: L1, O31, O38

Suggested Citation

Garfinkel, Jon A. and Hammoudeh, Mosab, Competition and Innovation Revisited: A Product-Level View (November 20, 2020). Available at SSRN: https://ssrn.com/abstract=3684095 or http://dx.doi.org/10.2139/ssrn.3684095

Jon A. Garfinkel

University of Iowa - Tippie College of Business ( email )

108 PBB
Iowa City, IA 52242-1000
United States
319-335-0943 (Phone)
319-335-3690 (Fax)

HOME PAGE: http://www.biz.uiowa.edu/faculty/jgarfinkel

Mosab Hammoudeh (Contact Author)

California State University, Fullerton - College of Business and Economics ( email )

Fullerton, CA
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
733
PlumX Metrics