Innovative activity and barriers to entry

The short-run effects of potential competition on innovative input decisions are studied for an innovating firm realizing that by increasing the magnitude of its efforts it may enlarge its temporary monopoly position. Additional protection from new competition is viewed as resulting from to the innovator exogenous barriers to rivals' entry decisions and from the assurance of a temporary monopoly during an entry lag. This protection is shown to promote innovative activity in some circumstances, but to temper such efforts in other situations.