Competition and Innovation: In Support of the Inverted-U Relationship
| Authors | |
|---|---|
| Year of publication | 2009 |
| Type | Article in Proceedings |
| Conference | Mathematical Methods in Economics 2009 |
| MU Faculty or unit | |
| 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. |