Incumbent innovation and domestic entry

Oliver Falck, Stephan Heblich*, Stefan Kipar

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

5 Citations (Scopus)

Abstract

This paper analyzes the escape-entry incentive for innovation by incumbent firms. The threat posed by the possibility of leading-edge firms entering the market influences incumbent innovation. To overcome problems of endogeneity, we apply an instrumental variable approach to analyze a rich firm-level dataset (1987-2000) for Germany. We find evidence that domestic entry has a negative effect on incumbent product innovation, which is a strong indication of new entrants' comparative advantage in commercializing new ideas. In contrast, domestic entry has a positive effect on incumbent process innovations, an effect also known as the escape-entry effect.

Original languageEnglish
Pages (from-to)271-279
Number of pages9
JournalSmall Business Economics
Volume36
Issue number3
DOIs
Publication statusPublished - Apr 2011

Keywords

  • Entry
  • Process innovation
  • Product innovation
  • RESEARCH-AND-DEVELOPMENT
  • LIFE-CYCLE
  • SIZE

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