Competition and growth: reconciling theory and evidence

From book description: Though competition occupies a prominent place in the history of economic thought, among economists today there is still a limited, and sometimes contradictory, understanding of its impact. In Competition and Growth, Philippe Aghion and Rachel Griffith offer the first serious attempt to provide a unified and coherent account of the effect competition policy and deregulated entry has on economic growth. The book takes the form of a dialogue between an applied theorist calling on "Schumpeterian growth" models and a microeconometrician employing new techniques to gauge competition and entry. In each chapter, theoretical models are systematically confronted with empirical data, which either invalidates the models or suggests changes in the modeling strategy. Aghion and Griffith note a fundamental divorce between theorists and empiricists who previously worked on these questions. On one hand, existing models in industrial organization or new growth economics all predict a negative effect of competition on innovation and growth: namely, that competition is bad for growth because it reduces the monopoly rents that reward successful innovators. On the other hand, common wisdom and recent empirical studies point to a positive effect of competition on productivity growth. To reconcile theory and evidence, the authors distinguish between pre- and post-innovation rents, and propose that innovation may be a way to escape competition, an idea that they confront with microeconomic data. The book's detailed analysis should aid scholars and policy makers in understanding how the benefits of tougher competition can be achieved while at the same time mitigating the negative effects competition and imitation may have on some sectors or industries

The U-Shaped relationship between vertical integration and competition: theory and evidence

This paper considers how competition can affect aggregate innovative activity through its effects on firms' decision whether or not to vertically integrate. A moderate increase in competition enhances innovation incentives, too much competition discourages innovative effort. These effects generates an inverted-U relationship between competition and innovation and between competition and the incentive to vertically integrate. Preliminary evidence finds that there is a non-linear relationship between competition and the propensity of firms to vertically integrate. These results seem to be more consistent with the Property Right Theory (PRT) of vertical integration than with the Transaction Cost Economics (TCE) approach

The role of musical composition in promoting church unity

This thesis considers a unique perspective on the common church contexts and conflicts observed when church music is at the centre of discussions. It is distinctive in as much as it ponders several similarities that exist between the concepts of musical unity and unity as expressed and encouraged within scripture. It challenges the perceived acceptance of the norm that ’worship wars’ still happen in many churches and, from the viewpoint of a composer, offers practical solutions that may serve both individual churches and denominational groups in providing a scaffold for future discussions and decisions. Jesus’ command in John 13: 34-35, and Paul’s teaching on unity form the scriptural basis for the thesis’ scope and definition of the phrase ‘church unity’. In comparing this with ‘compositional unity’, comprehensive analysis of hymnody and contemporary Christian music used in gathered worship will not be offered, but consideration is given as to why certain hymns and songs have lasted above others, illustrating links between good compositional writing and unity as explained within the study. Musical examples are explored so that key features in the discussion are identified. Also, a survey of churches is conducted, helping to highlight congregational observations and concerns. The compositional craft is then better focussed to address or mitigate these findings, while balancing the need for musical creativity with congregationally appropriate solutions in the local context. As part of the outcome, the included composition portfolio applies the research and offers a small catalogue of new compositions and arrangements: hymns, songs and elements from a Mass setting. The thesis finds its purpose in encouraging a new perspective on church music and fresh impetus into the centrality of congregational singing within corporate worship, unity amongst the body of Christ, and the role of composers and musical decisions to impact on both

Competition and innovation: an inverted U relationship

This paper investigates the relationship between product market competition (PMC) and innovation. A Schumpeterian growth model is developed in which firms innovate ‘step-by-step’, and where both technological leaders and their followers engage in R&D activities. In this model, competition may increase the incremental profit from innovating; on the other hand, competition may also reduce innovation incentives for laggards. This model generates four main predictions which we test empirically. First, the relationship between product market competition (PMC) and innovation is an inverted U-shape: the escape competition effect dominates for low initial levels of competition, whereas the Schumpeterian effect dominates at higher levels of competition. Second, the equilibrium degree of technological ‘neck-and-neckness’ among firms should decrease with PMC. Third, the higher the average degree of ‘neck-and-neckness’ in an industry, the steeper the inverted-U relationship between PMC and innovation in that industry. Fourth, firms may innovate more if subject to higher debt-pressure, especially at lower levels of PMC. We confront these four predictions with a new panel data set on UK firms’ patenting activity at the US patenting office. The inverted U relationship, the neck and neck, and the debt pressure predictions are found to accord well with observed behavior in the data

Competition and innovation: an inverted U relationship?

This paper investigates the relationship between product market competition and innovation. It uses the radical policy reforms in the UK as instruments for changes in product market competition, and finds a robust inverted-U relationship between competition and patenting. It then develops an endogenous growth model with step-by-step innovation that can deliver this inverted-U pattern. In this model, competition has an ambiguous effect on innovation. On the one hand, it discourages laggard firms from innovating, as it reduces their rents from catching up with the leaders in the same industry. On the other hand, it encourages neck-and-neck firms to innovate in order to escape competition with their rival. The inverted-U pattern results from the interplay between these two effects, together with the effect of competition on the equilibrium industry structure. The model generates two additional predictions: on the relationship between competition and the average technological distance between leaders and followers across industries; and on the relationship between the distance of an industry to its technological frontier and the steepness of the inverted-U. Both predictions are supported by the data

The effects of entry on incumbent innovation and productivity

How does firm entry affect innovation incentives and productivity growth in incumbent firms? Micro-data suggests that there is heterogeneity across industries--incumbents in technologically advanced industries react positively to foreign firm entry, but not in laggard industries. To explain this pattern, we introduce entry into a Schumpeterian growth model with multiple sectors which differ by their distance to the technological frontier. We show that technologically advanced entry threat spurs innovation incentives in sectors close to the technological frontier--successful innovation allows incumbents to prevent entry. In laggard sectors it discourages innovation--increased entry threat reduces incumbents' expected rents from innovating. We find that the empirical patterns hold using rich micro-level productivity growth and patent panel data for the UK, and controlling for the endogeneity of entry by exploiting the large number of policy reforms undertaken during the Thatcher era

Scaffolds and Generalized Integral Galois Module Structure

Let $L/K$ be a finite, totally ramified $p$-extension of complete local fields with residue fields of characteristic $p > 0$, and let $A$ be a $K$-algebra acting on $L$. We define the concept of an $A$-scaffold on $L$, thereby extending and refining the notion of a Galois scaffold considered in several previous papers, where $L/K$ was Galois and $A=K[G]$ for $G=\mathrm{Gal}(L/K)$. When a suitable $A$-scaffold exists, we show how to answer questions generalizing those of classical integral Galois module theory. We give a necessary and sufficient condition, involving only numerical parameters, for a given fractional ideal to be free over its associated order in $A$. We also show how to determine the number of generators required when it is not free, along with the embedding dimension of the associated order. In the Galois case, the numerical parameters are the ramification breaks associated with $L/K$. We apply these results to biquadratic Galois extensions in characteristic 2, and to totally and weakly ramified Galois $p$-extensions in characteristic $p$. We also apply our results to the non-classical situation where $L/K$ is a finite primitive purely inseparable extension of arbitrary exponent that is acted on, via a higher derivation (but in many different ways), by the divided power $K$-Hopf algebra.Comment: Further minor corrections and improvements to exposition. Reference [BE] updated. To appear in Ann. Inst. Fourier, Grenobl