How does firms' perceived competition affect technological innovation in Luxembourg?
Wladimir Raymond & Tatiana Plotnikova
This paper revisits the competition-innovation relationship using an
unbalanced panel of enterprise data stemming from four waves of the
Luxembourgish innovation survey for the period 2002-2010. We estimate by
full-information maximum likelihood a nonlinear dynamic
simultaneous-equations model with pseudo-fixed effects using four
measures of perceived competition and three indicators of innovation and
find that firms whose main market is characterised by rapid obsolescence
of products are more likely to spend on innovation and to introduce
product or process innovations. We also find that these firms also often
consider their main market to be characterised by rapidly-changing
technologies where higher competition also implies higher innovation.
Keywords: Perceived competition, technological innovation, panel data
JEL Classification: O31, O32, O38, C33, C35