Barbos, Andrei (2009): Information acquisition and innovation under competitive pressure.
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This paper studies information acquisition under competitive pressure and proposes a model to examine the relationship between product market competition and the level of innovative activity in an industry. Our paper offers theoretical support for recent empirical results that point to an inverted-U shape relationship between competition and innovation. The model presents an optimal timing decision problem where a firm endowed with an idea trades the benefits of waiting for additional information on whether this idea can be converted into a successful project against the cost of delaying innovation: a given firm's profit following innovation is decreasing in the number of firms that invested at earlier dates. By recognizing that a firm can intensify its innovative activity on two dimensions, a risk dimension and a quantitative dimension, we show that firms solve this trade-off precisely so as to generate the inverted-U shape relationship.
|Item Type:||MPRA Paper|
|Original Title:||Information acquisition and innovation under competitive pressure|
|Keywords:||Innovation, Information Acquisition, Timing Games, Preemption|
|Subjects:||D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L10 - General
D - Microeconomics > D4 - Market Structure and Pricing > D40 - General
|Depositing User:||Andrei Barbos|
|Date Deposited:||07. Apr 2012 16:22|
|Last Modified:||21. Feb 2013 09:02|
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Available Versions of this Item
Information Acquisition and Innovation under Competitive Pressure. (deposited 10. Jul 2010 10:00)
Information Acquisition and Innovation under Competitive Pressure. (deposited 30. Jul 2010 05:50)
- Information acquisition and innovation under competitive pressure. (deposited 07. Apr 2012 16:22) [Currently Displayed]
- Information Acquisition and Innovation under Competitive Pressure. (deposited 30. Jul 2010 05:50)