Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 702: Service-sector competition, innovation and R&D

Patrik Gustavsson Tingvall () and Patrik Karpaty ()
Additional contact information
Patrik Gustavsson Tingvall: China Economic Research Center (CERC), Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Patrik Karpaty: Department of Economics, Postal: Örebro University, SE-701 82 Örebro, Sweden

Abstract: The central prediction of the Aghion et al. (2005) model is an inverted U-shaped relation between innovation and competition. The model is built on the assumption of a product market and has not yet been empirically tested on service-sector firms. Using detailed firm-level data, we find the inverse U-shaped relation to hold for both small and large service-sector firms. However, non-exporting service firms deviate from the overall pattern. A more detailed breakdown of innovation expenditures shows that the inverse U-shaped pattern holds for both intramural R&D and training, but not for extramural R&D. Finally, as competition increases, small firms tend to seek more strategic alliances with competitors while large firms tend to decrease their collaboration with competitors. To some extent, the behavior of large firms can be due to their greater capacity to handle innovation projects internally and as competition increases, so does the payoff of an edge to competitors.

Keywords: R&D; innovation; competition; service sector

JEL-codes: D40; L10; L60; O30

33 pages, October 10, 2008

Full text files

hastef0702.pdf PDF-file Full text

Download statistics

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

This page generated on 2018-03-27 10:25:01.