| Abstract: | We develop Lancaster's model of consumer behaviour under product differentiation to analyse Schumpeterian creative destruction. Launching new products with novel characteristics enables firms to temporarily steal market share from rivals. Product launch is monitored by using trade marks, patents and research and development. The dataset covers a large sample of UK service and manufacturing firms. We find that stock market value is positively associated with own trade mark activity and trade mark‐active firms achieve significantly higher value‐added. Greater trade mark activity by competitors reduces net output of firms, but raises their stock market value. This is consistent with the Schumpeterian process of competition through innovation. |
