Time Based Competition and Innovation
24 Pages Posted: 2 May 2002
Date Written: April 2002
Abstract
By choosing their organizations, firms trade-off productive efficiency and time spent in implementing innovation. We embed such a productivity/reactivity trade-off in a growth model with creative destruction. We first highlight the specific impact of time in firm competition: in addition to weighing costs and benefits of late adoption, firms use time as a strategic variable through the possibility of overtaking their competitors. Due to this very specificity of time competition, multiple equilibria may emerge: when firms adopt quickly, their stock market valuation is larger, and they innovate more and produce less. Moreover, the IT revolution is shown to favour quick implementation via a general equilibrium feedback on organizational choice.
Keywords: Firm organisation, reactivity, innovation, competition
JEL Classification: L16, L23, O32
Suggested Citation: Suggested Citation
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