A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth

41 Pages Posted: 27 Apr 2004

See all articles by Wendy Carlin

Wendy Carlin

University College London - Department of Economics; Centre for Economic Policy Research (CEPR)

Mark E. Schaffer

Heriot-Watt University - Centre for Economic Reform and Transformation; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Paul Seabright

University of Toulouse I - Industrial Economic Institute (IDEI); Centre for Economic Policy Research (CEPR)

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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

Carlin, Wendy and Schaffer, Mark E. and Seabright, Paul, A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth (March 2004). Available at SSRN: https://ssrn.com/abstract=533085 or http://dx.doi.org/10.2139/ssrn.533085

Wendy Carlin (Contact Author)

University College London - Department of Economics ( email )

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Mark E. Schaffer

Heriot-Watt University - Centre for Economic Reform and Transformation ( email )

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Centre for Economic Policy Research (CEPR)

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Paul Seabright

University of Toulouse I - Industrial Economic Institute (IDEI) ( email )

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Centre for Economic Policy Research (CEPR)

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United Kingdom

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