Competition, R&D and the cost of innovation

Philippe Askenazy (1, 2, 3, 4) , Christophe Cahn (1, 4, 5) , Delphine Irac (3)

1 PSE - Paris School of Economics
2 IZA - Institute for the Study of Labor
3 Centre de recherche de la Banque de France
4 PJSE - Paris-Jourdan Sciences Economiques
5 DAMEP - Banque de France - Direction de l'analyse macroéconomique et de la prévision

This paper proposes a model in the spirit of Aghion and al. (2005) that relates the magnitude of the impact of competition on R&D to the cost of innovation. The effect of competition on R&D is an inverted U-shape. However, the shape is flatter and competition policy is therefore less relevant for innovation when innovations are relatively costly. Intuitively, if innovations are costly for a firm, competitive shocks have to be significant to alter its innovation decisions. Empirical investigations using a unique panel dataset from the Banque de France show that an inverted U-shaped relationship can be clearly evidenced for the largest firms, but the curve becomes flatter when the relative cost of R&D increases. For large costs, the relationship even vanishes.

Ce papier propose un modèle dans l'esprit d'Aghion et al. (1995). Il relie la sensibilité de la R&D à la concurrence, au coût des innovations. Plus les innovations sont coûteuses, plus les chocs concurrentiels doivent être importants pour modifier le comportement des entreprises. L'exploitation empirique de données d'un vaste panel d'entreprises de la Banque de France conforte cet argument. Elle exhibe une relation en U-inversé entre concurrence et innovation pour les grandes entreprises mais cette relation est plus plate lorsque le coût d'innover relativement à la taille de l'entreprise augmente.

Mots clés: concurrence; competition; R&D; innovation

Domaines: Economies et finances

Philippe Askenazy, Christophe Cahn, Delphine Irac. Competition, R&D and the cost of innovation. 2008. ⟨halshs-00586690⟩