Anti-Competitive Conduct, In-House R&D, and Growth

41 Pages Posted: 26 Apr 2007

See all articles by Volker Grossmann

Volker Grossmann

University of Fribourg - Faculty of Economics and Social Science; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Thomas Michael Steger

University of Leipzig/Institute for Theoretical Economics/Macroeconomics; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2007

Abstract

Incumbent firms have two basic possibilities to improve their competitive position in the product market: investment in R&D and the creation of entry barriers to the disadvantage of potential rivals, e.g. through lobbying activities, campaign contributions, bribes or the adoption of incompatible technologies. This paper proposes a simple oligopoly model which raises the possibility that such anti-competitive conduct and R&D investment are complementary activities for incumbents. Consequently, an institutional framework or technological possibilities which encourage anti-competitive conduct, although impeding entry of potential rivals and accentuating standard oligopoly distortions, may foster R&D-based growth and welfare. However, this outcome is less likely if entrants exert technological spillover effects, e.g. through foreign direct investment. Stronger protection of intellectual property rights, although triggering anti-competitive conduct and thereby impeding market entry as well, is more likely to foster economic growth.

Keywords: anti-competitive conduct, in-house R&D, economic growth, entry barriers, knowledge spillovers

JEL Classification: L13, O31, O40

Suggested Citation

Grossmann, Volker and Steger, Thomas Michael, Anti-Competitive Conduct, In-House R&D, and Growth (April 2007). CESifo Working Paper Series No. 1963. Available at SSRN: https://ssrn.com/abstract=982789

Volker Grossmann

University of Fribourg - Faculty of Economics and Social Science ( email )

Fribourg, CH 1700
Switzerland

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Thomas Michael Steger (Contact Author)

University of Leipzig/Institute for Theoretical Economics/Macroeconomics ( email )

Grimmaische Str. 12
D-04109 Leipzig
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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