A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth
41 Pages Posted: 27 Apr 2004
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A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth
A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth
Date Written: March 2004
Abstract
This paper examines the importance of competition in the growth and development of firms. We make use of the large-scale natural experiment of the shift from an economic system without competition to a market economy to shed light on the factors that influence innovation by firms and their subsequent growth. Using a dataset from a survey of nearly 4,000 firms in 24 transition countries, we find evidence of the importance of a minimum of rivalry in both innovation and growth: the presence of at least a few competitors is effective both directly and through improving the efficiency with which the rents from market power in product markets are utilised to undertake innovation.
Keywords: competition, productivity growth, innovation, rivalry, transition
JEL Classification: P0, L1, L33, O12
Suggested Citation: Suggested Citation
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