Strategic R&D Investment, Competitive Toughness and Growth

CORE Discussion Paper No. 2004/14

20 Pages Posted: 28 Mar 2007

See all articles by Claude d'Aspremont

Claude d'Aspremont

Catholic University of Louvain - Center for Operations Research and Econometrics (CORE)

Rodolphe dos Santos Ferreira

University of Angers - Bureau of Economic Theory and Application (BETA)

Louis-Andre Gerard-Varet

National Center for Scientific Research (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS)

Date Written: April 2004

Abstract

We develop an overlapping generations model, where firms (as consumers) have a two-period life, investing in R&D during the first period and competing in the product market in the second period. The number of firms is endogenously determined and the set of successful firms by a Bernoullian random process. We show the possibility of an inverted-U relationship between innovation and product market competition for an individual industry, based on the possibility for non-successful firms to remain productive. When the relative cost advantage of successful firms is large (large innovation step or small spillovers) this possibility results from the probabilistic nature of the model.

Keywords: competitive toughness, R&D incentives, strategic investment

JEL Classification: L11, L16, O32, O41

Suggested Citation

Daspremont, Claude and dos Santos Ferreira, Rodolphe and Gerard-Varet (deceased), Louis-Andre, Strategic R&D Investment, Competitive Toughness and Growth (April 2004). CORE Discussion Paper No. 2004/14, Available at SSRN: https://ssrn.com/abstract=971513 or http://dx.doi.org/10.2139/ssrn.971513

Claude Daspremont (Contact Author)

Catholic University of Louvain - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
32 10 474335 (Phone)

Rodolphe Dos Santos Ferreira

University of Angers - Bureau of Economic Theory and Application (BETA) ( email )

61, avenue de la Foret Noire
Strasbourg, 67000
France
+33 03 9024 2073 (Phone)
+33 03 9024 2071 (Fax)

Louis-Andre Gerard-Varet (deceased)

National Center for Scientific Research (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS)

N/A

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