Competition and Innovation: In Support of the Inverted-U Relationship

Authors

KRČÁL Ondřej

Year of publication 2009
Type Article in Proceedings
Conference Mathematical Methods in Economics 2009
MU Faculty or unit

Faculty of Economics and Administration

Citation
Field Economy
Keywords Innovation; Competition; Prospect Theory; Inverted-U Relationship
Description In this article, we show that different profits due to different intensity of competition can influence innovation decisions of otherwise identical firms. We propose a model of innovation decisions in which, under certain conditions, firms with very high and very low profits can be expected to innovate less than firms with moderate profits, which is consistent with the hypothesis of the inverted-U relationship between competition and innovation.

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