Innovation Dynamics and Endogenous Market Structure Econometric Results from Aggregated Survey Data
23 Pages Posted: 5 Dec 2002
Date Written: July 15, 2001
Abstract
This paper examines empirically the relationship between innovation and market structure within a simultaneous framework at the industry level of aggregation. We use a model in which R&D affects both, demand and cost conditions. An optimization process leads to optimal industry R&D expenditure and market structure in a symmetric equilibrium. The model is applied to a newly constructed panel for Germany. Generalized Method of Moments (GMM) estimation techniques for dynamic panel data systems are used to estimate the parameters of interest. We found a positive long-run effect of R&D on markets' sales concentration. In contrast, competition enforces innovation, i.e. sales concentration has a negative impact on R&D.
Keywords: innovation, R&D, market structure, panel data, dynamic models, applied econometrics
JEL Classification: O31, L11, C33, L60
Suggested Citation: Suggested Citation
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