Scandinavian Working Papers in Economics

Working Paper Series,
Trade Union Institute for Economic Research

No 204: Is There Really an Inverted U-shaped Relation Between Competition and R&D?

Andreas Poldahl () and Patrik Gustavsson Tingvall
Additional contact information
Andreas Poldahl: FIEF, Postal: and ESI, Örebro University, SE-701 82 Örebro, Sweden
Patrik Gustavsson Tingvall: FIEF, Postal: and EIJS, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm , Sweden

Abstract: We test whether predictions of the Aghion and Howitt (2004) model are supported by firm level data. In particular, we analyze if there is an inverted U-shaped relation between competition and R&D. Results show that the inverted U-shaped relation is supported by the Herfindahl index but not by the price cost margin. Using the Herfindahl index results suggest that breaking up monopolies increases R&D while further increases in competition most likely leads to reduced R&D. Comparing different estimators, we find that time-series based estimators typically result in less clear-cut results, probably driven by a lack of time series variation in measures of competition.

Keywords: R&D; Competition; Firm size; Spillovers

JEL-codes: D40; L10; L60; O30

25 pages, February 27, 2005

Full text files

WP204.pdf PDF-file (302kB) 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Sune Karlsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:31:54.