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Adoption of Product and Process Innovations in Differentiated Markets: The Impact of Competition

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Abstract

The paper examines the effects of the degree of competition on firms'decisions to innovate in differentiated markets. Firms favor productinnovations if they produce close substitutes (so competition is severe) andfavor process innovations if products are differentiated (so competition isless severe). Assumptions on the strategic complementarity of product andprocess innovations and on the decreasing returns of a product innovationare found to be the critical assumptions in the sense of Milgrom and Roberts (1994).

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Authors and Affiliations

  1. Department of Economics, Chemnitz University of Technology, D-09107, Chemnitz, Germany

    Pia Weiss

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  1. Pia Weiss
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Weiss, P. Adoption of Product and Process Innovations in Differentiated Markets: The Impact of Competition. Review of Industrial Organization 23, 301–314 (2003). https://doi.org/10.1023/B:REIO.0000031372.79077.fc

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  • DOI: https://doi.org/10.1023/B:REIO.0000031372.79077.fc

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