Competition, R&D and the cost of innovation

This paper proposes a model in the spirit of Aghion and al. (2005) that relates the magnitude of the impact of competition on R&D to the cost of innovation. The effect of competition on R&D is an inverted U-shape. However, the shape is flatter and competition policy is therefore less relevant for innovation when innovations are relatively costly. Intuitively, if innovations are costly for a firm, competitive shocks have to be significant to alter its innovation decisions. Empirical investigations using a unique panel dataset from the Banque de France show that an inverted U-shaped relationship can be clearly evidenced for the largest firms, but the curve becomes flatter when the relative cost of R&D increases. For large costs, the relationship even vanishes.competition ; R&D ; innovation

Competition, R&D and the cost of innovation

This paper proposes a model in the spirit of Aghion and al. (2005) that relates the magnitude of the impact of competition on R&D to the cost of innovation. The effect of competition on R&D is an inverted U-shape. However, the shape is flatter and competition policy is therefore less relevant for innovation when innovations are relatively costly. Intuitively, if innovations are costly for a firm, competitive shocks have to be significant to alter its innovation decisions. Empirical investigations using a unique panel dataset from the Banque de France show that an inverted U-shaped relationship can be clearly evidenced for the largest firms, but the curve becomes flatter when the relative cost of R&D increases. For large costs, the relationship even vanishes.Ce papier propose un modèle dans l'esprit d'Aghion et al. (1995). Il relie la sensibilité de la R&D à la concurrence, au coût des innovations. Plus les innovations sont coûteuses, plus les chocs concurrentiels doivent être importants pour modifier le comportement des entreprises. L'exploitation empirique de données d'un vaste panel d'entreprises de la Banque de France conforte cet argument. Elle exhibe une relation en U-inversé entre concurrence et innovation pour les grandes entreprises mais cette relation est plus plate lorsque le coût d'innover relativement à la taille de l'entreprise augmente

The Determinants of Intra-Firm Trade

This paper analyzes the determinants of the intra-firm vs arms’length sourcing mode of imported inputs. We build a unique French dataset of 1,141,393 import transactions at the firm, country and product levels in the year 1999 that allow us to distinguish the different sourcing modes. We study the firms-, country- and product- determinants of intra-firm trade. We confirm a number of theory-based predictions building on the residuals property rights approach and provide some empirical facts that can be used to further refine this as well as alternative theories. In particular, we highlight the fact that firms’ heterogeneity needs to be evaluated across different dimensions. Furthermore, we point out that complex goods are more likely to be produced within the firm boundaries suggesting that those material and immaterial attributes that characterized a product play a key role in globalized sourcing strategies.Internationalization strategies; intra-firm trade; outsourcing; firm heterogeneity

The Determinants of Intrafirm Trade: Evidence from French Firms

How well does the theory of the firm explain the choice between intrafirm and arms' length trade? This paper uses firm-level import data from France to look into this question. We find support for three key predictions of property-rights theories of the multinational firm. Intrafirm imports are more likely: (i) in capital- and skill-intensive firms; (ii) in highly productive firms; (iii) from countries with well-functioning judicial institutions. We further bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin. Doing so we uncover interesting patterns in the data that require further theoretical investigation.intrafirm trade, outsourcing, firm heterogeneity, incomplete contracts, internationalization strategies, quality of institutions, extensive margin, intensive margin

Advertising and R&D: Theory and evidence from France

This paper exploits a unique panel of 59,000 French firms over 1990-2004 to investigate the interactions between R&D, advertising and the competitive environment.The empirical findings confirm the predictions of a dynamic model that complements results known in static frameworks. First, more competition pushes Neck and Neck firms to advertise more to attract a larger share of consumers on their products or services. Second, for a given competitive environment, quality leaders spend more in advertising in order to extract maximal rents; thus, lower costs of ads may favor R&D

The Determinants of Intrafirm Trade

Abstract This paper analyzes the determinants of the sourcing mode of imported inputs at the firm level. We exploit a unique French dataset of 1,141,393 import transactions spanning across firm, countries and products in 1999, where we observe whether a transaction is intra-firm or at arms' length. We first study which firm-, country-and product-specific factors affect the 'make or buy' choice at the firm level (extensive margin). We confirm a number of theoretical predictions of property-rights models, and provide a number of empirical facts that can be used to refine theory. We finally compare our results with previous findings on more aggregated data, highlighting the importance of separating the extensive and intensive margins of imports. Keywords: intra-firm trade; outsourcing; firm heterogeneity; incomplete contracts; internationalization strategies; quality of institutions, extensive margin, intensive margin

Euro Area Structural Convergence? A Multi-Criterion Cluster Analysis

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The determinants of intrafirm trade: evidence from French firms

How well does the theory of the firm explain the choice between intrafirm and arms' length trade? This paper uses firm-level import data from France to look into this question. We find support for three key predictions of property-rights theories of the multinational firm. Intrafirm imports are more likely: (i) in capital- and skill-intensive firms; (ii) in highly productive firms; (iii) from countries with well-functioning judicial institutions. We further bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin. Doing so we uncover interesting patterns in the data that require further theoretical investigation

Déterminants de l'innovation dans les PME

La relation entre le niveau de concurrence et l'intensité de l'innovation a une forme de U inversé. Cette forme résulte de l'idée selon laquelle la concurrence peut avoir un impact différencié sur les entreprises selon l'hétérogénéité de leur niveau technologique. Ainsi, une concurrence intense est favorable à l'innovation lorsque les entreprises ont un niveau technologique proche car elles sont fortement incitées à se différencier les unes des autres pour atténuer la pression concurrentielle (effet de fuite de la concurrence par l'innovation). Lorsque ce degré technologique diffère, la concurrence forte n'est pas favorable à l'innovation de l'entreprise leader qui voit ses rentes diminuer (effet de désincitation). Ainsi, suivant la nature de la concurrence dans un secteur, une entreprise peut réagir positivement (respectivement négativement) à une intensification de la concurrence suivant qu'elle se trouve dans le bras ascendant (respectivement descendant) de cette relation en U inversé. Or, quel que soit l'effet qui prédomine (fuite de la concurrence ou effet désincitatif), on montre, d'un point de vue tant théorique qu'empirique (à partir de l'exploitation d'un panel d'entreprises françaises extrait des bases FIBEN et de la Centrale de bilans de la Banque de France) que lorsque la taille de l'entreprise relative au coût de l'innovation est plus petite, cet effet est plus faible, ce qui signifie que la courbe en U s'aplatit et donc que les choix d'innovation d'une entreprise sont moins sensibles aux politiques de concurrence. En appariant les données sur les bilans des entreprises avec la base des incidents de paiement de la Banque, on montre également que les PME peuvent faire face à des contraintes de crédit en bas du cycle économique, ce qui les conduit à réduire leurs investissements de R&D à un moment où précisément il conviendrait de les accroître et aboutit ainsi à un niveau moyen d'investissement en R&D inférieur à ce qui serait souhaitable. Ces résultats suggèrent que l'impact sur l'effort de recherche des mesures en faveur de la concurrence pourrait avoir un effet limité dans les secteurs où les entreprises sont relativement petites. En revanche, un accompagnement des PME innovantes en phase basse de cycle pourrait favoriser leur effort permanent d'innovation