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Competition, imitation and growth with step-by-step innovation

Aghion, P.; Harris, C.; Howitt, P.; Vickers, J.; (2001) Competition, imitation and growth with step-by-step innovation. Review of Economic Studies , 68 (3) pp. 467-492. 10.1111/1467-937X.00177.

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Is more intense product market competition and imitation good or bad for growth? This question is addressed in the context of an endogenous growth model with "step-by-step" innovations, in which technological laggards must first catch up with the leading-edge technology before battling for technological leadership in the future. In contrast to earlier Schumpeterian models in which innovations are always made by outsider firms who earn no rents if they fail to innovate and become monopolies if they do innovate, here we find: first, that the usual Schumpeterian effect of more intense product market competition (PMC) is almost always outweighed by the increased incentive for firms to innovate in order to escape competition, so that PMC has a positive effect on growth; second, that a little imitation is almost always growth-enhancing, as it promotes more frequent neck-and-neck competition, but too much imitation is unambiguously growth-reducing. The model thus points to complementary roles for competition (anti-trust) policy and patent policy.

Type: Article
Title: Competition, imitation and growth with step-by-step innovation
DOI: 10.1111/1467-937X.00177
Publisher version: http://dx.doi.org/10.1111/1467-937X.00177
Language: English
Keywords: Competition, growth, technology
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/17696
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