Time Based Competition and Innovation

24 Pages Posted: 2 May 2002

See all articles by Mathias Thoenig

Mathias Thoenig

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS); Centre for Economic Policy Research (CEPR); University of Geneva - Department of Political Economics

David Thesmar

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

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

Thoenig, Mathias and Thesmar, David, Time Based Competition and Innovation (April 2002). Available at SSRN: https://ssrn.com/abstract=310424

Mathias Thoenig

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS) ( email )

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75007 Paris
France
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Geneva - Department of Political Economics ( email )

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David Thesmar (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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