This paper investigates the effect of yardstick competition on firms’ incentives to invest in cost-reducing innovations. We show that an increase in the intensity of yardstick competition, for which we provide a natural measure, increases the incentives to innovate.
Competition and innovation; Yardstick competition; Cost reduction;
- D4: Market Structure and Pricing
- L1: Market Structure, Firm Strategy, and Market Performance
- L5: Regulation and Industrial Policy
Yassine Lefouili, “Does competition spur innovation? The case of yardstick competition”, Economics Letters, Elsevier, vol. 137, December 2015, pp. 135–139.
Economics Letters, Elsevier, vol. 137, December 2015, pp. 135–139