An Alternative Explanation of the Inverted-U Relationship between Competition and Innovation
| Authors | |
|---|---|
| Year of publication | 2009 |
| Type | Article in Proceedings |
| Conference | Neo-Schumpeterian Economics: An Agenda for the 21st Century II |
| MU Faculty or unit | |
| Citation | |
| Keywords | Schumpeter, 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. Under certain conditions, firms with very high and very low profits will innovate less than firms with moderate profits, which is consistent with the hypothesis of inverted-U relationship between competition and innovation. |