The Effects of Entry on Incumbent Innovation and Productivity 21

  title={The Effects of Entry on Incumbent Innovation and Productivity 21},
  author={Philippe Aghion and Richard W. Blundell and Rachel M. Griffith and Peter J Howitt and Susanne Prantl},
How does firm entry affect innovation incentives in incumbent firms? Microdata suggest that there is heterogeneity across industries. Specifically, incumbent productivity growth and patenting is positively correlated with lagged greenfield foreign firm entry in technologically advanced industries, but not in laggard industries. In this paper we provide evidence that these correlations arise from a causal effect predicted by Schumpeterian growth theory—the threat of technologically advanced… CONTINUE READING
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