Competition, R&D Activities and Endogenous Growth
A prediction of the endogenous growth models with quality ladders is that there exists a negative relation between growth and the degree of market competition. The aim of this article is to shed light on the relation between competition and growth when horizontal and vertical innovations can simultaneously occur by adopting the structure of the patent race model; we show the way in which the toughness of competition influences the firmsÕ incentives to invest in the two R&D activities; in particular, the presence of vertical and horizontal differentiation can determine a non monotonic long run relationship between competition and growth.
Growth; Competition; Vertical and Horizontal Innovations
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