The Effects Of Entry On Incumbent Innovation And Productivity

Topics:
Organization
Tags:
Entry,
Incumbent,
Innovation,
Leadership,
Management,
Strategy
Source:
Harvard University

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Overview: How does firm entry affect innovation incentives and productivity growth in incumbent firms? Micro-data suggests that there is heterogeneity across industries - incumbents in technologically advanced industries react positively to entry, but not in laggard industries. To explain this pattern, entry into a Schumpeterian growth model with multiple sectors which differ by their distance to the technological frontier is introduced. It shows that entry threat spurs innovation incentives in technologically advanced sectors - successful innovation allows incumbents to prevent entry. In laggard sectors it discourages innovation - increased entry reduces incumbents' expected rents from innovating.

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Format: PDF | Size: 1,044KB | Date: Oct 2005 | Pages: 49


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