Innovation and Market Concentration with Asymmetric Firms

  title={Innovation and Market Concentration with Asymmetric Firms},
  author={Marc Escrihuela-Villar},
This paper considers a theoretical model of n asymmetric firms that reduce their initial unit costs by spending on R&D activities. In accordance with Schumpeterian hypotheses we obtain that more efficient (bigger) firms spend more in R&D and this leads to a more concentrated market structure. We also find a positive relationship between innovation and market concentration. This calls for a corrective tax on R&D activities to curtail strategic incentives to over-invest in R&D trying to achieve a… CONTINUE READING


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