Empirical Analysis of the Role of Competition in Innovation Activity of Firms: Evidence from BEEPS Data
https://doi.org/10.18288/1994-5124-2021-4-104-143
Abstract
The study discusses the relationship between competition and innovation in low-tech and high-tech industries in transition economies. The analysis is based on the World Bank’s Business Environment and Enterprise Performance Survey (BEEPS) for manufacturing industries in 32 countries and includes 8,686 observations. We find an inverted U-shaped relationship between competition and R&D expenditure for low-technology industries, and a positive monotonic relationship for high-technology industries, similar to the leſt side of the inverted U-shaped curve. The latter result is in contrast to the previous results for developed economies, which also find an inverted U-shaped relationship between competition and innovation. We assume that our results reflect the “localization” of competition in high-tech sectors of transition economies, when increased competition in the domestic market of transition economies is not restrictive by nature and may foster innovation activity. From an economic policy perspective, it is important to discuss how to improve innovation performance in order to avoid mimicking positive changes in transition economies, especially those characterized by authoritarian policymaking. We focus on two main areas. First, it is necessary to improve the quality of corporate governance in state-owned companies that do not differ in R&D spending from private companies but have lower innovation performance; and second, it is necessary to attract foreign direct investment and create an enabling environment for foreign-owned companies that tend to have higher innovativeness—all other things being equal—and may foster national innovation ecosystems.
About the Authors
Yu. V. Simachev
National Research University Higher School of Economics
Russian Federation
Russian Federation
Yuri V. Simachev, Cand. Sci. (Tech.), Professor. Centre for Structural Policy Research
11, Pokrovskiy bul., Moscow, 109028
A. A. Fedyunina
National Research University Higher School of Economics
Russian Federation
Russian Federation
Anna A. Fedyunina, Cand. Sci. (Econ.). Centre for Structural Policy Research
11, Pokrovskiy bul., Moscow, 109028
V. V. Dubkovskaya
National Research University Higher School of Economics
Russian Federation
Russian Federation
Valeriya V. Dubkovskaya
11, Pokrovskiy bul., Moscow, 109028
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Review
For citations:
Simachev Yu.V., Fedyunina A.A., Dubkovskaya V.V. Empirical Analysis of the Role of Competition in Innovation Activity of Firms: Evidence from BEEPS Data. Economic Policy. 2021;16(4):104-143. (In Russ.) https://doi.org/10.18288/1994-5124-2021-4-104-143
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