Competition and Innovation in Luxembourg |
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Authors: | Chiara Peroni Ivete S Gomes Ferreira |
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Institution: | (1) Service Central de la Statistique et des ?tudes ?conomiques (STATEC), 13 Rue Erasme, BP 304, 2013 Luxembourg, Grand Duchy of Luxembourg |
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Abstract: | This paper studies the empirical relation between market competition and innovation using Luxembourg’s Structural Business
Statistics. The competitive pressure in Luxembourg’s markets is assessed by computing a profit elasticity measure, based on
the idea of cost-efficiency. From this, the paper analyses the relation between competition and innovation performance by
estimating an equation for the determinants of R&D expenditure. The results show that Luxembourg’s industries are characterised
by low levels of competition intensity, especially in markets relevant to competition policy and regulation. The relation
between competition and innovation is non-linear and depends crucially on the efficient use of inputs to production. The impact
of the distribution of technological efficiency on innovation is assessed by measuring both average technology gap and technology
spread. The innovation effort is increasing as industries are closer to the frontier, and decreasing in the technology spread. |
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