A Decision-Theoretical Model of Competition and Innovation
| Authors | |
|---|---|
| Year of publication | 2009 |
| Type | Article in Proceedings |
| MU Faculty or unit | |
| Citation | |
| Web | http://www.univie.ac.at/RNIC/papers/Krcal_rnicconference09.pdf |
| Keywords | Innovation; Competition; Prospect Theory; Inverted-U Relationship |
| Description | In this paper, we show that competition influences innovation decisions of otherwise identical firms. Using prospect theoretical model of decision under uncertainty, we build two basic models that predict an inverted-U relationship between competition and innovation activity frequently observed in empirical studies. We also show that some combinations of the basic models are consistent with the inverted-U hypothesis. |