Competition as a Discovery Procedure: Schumpeter Meets Hayek in a Model of Innovation Academic Article

abstract

• I incorporate an insight of Friedrich Hayekthat competition allows a thousand flowers to bloom, and discovers the best among theminto a model of Schumpeterian innovation. Firms face uncertainty about the optimal direction of innovation, so more innovations implies a higher expected value of the best innovation. The model accounts for two seemingly contradictory relationships reported in recent empirical studiesa positive relationship between competition and industry-level productivity growth, and an inverted-U relationship between competition and firm-level innovation. Notwithstanding the positive relationship between competition and growth, I find antitrust policy reduces industry-level growth. (JEL B52, D83, G34, K21, L11, L12, O31)

authors

• Bento, Pedro

published proceedings

• American Economic Journal Macroeconomics

altmetric score

• 0.25

author list (cited authors)

• Bento, P.

citation count

• 32

complete list of authors

• Bento, Pedro

publication date

• January 2014

publisher

• American Economic Association  Publisher

published in

• American Economic Journal Macroeconomics  Journal

keywords

• 9 Industry, Innovation And Infrastructure

Digital Object Identifier (DOI)

• 10.1257/mac.6.3.124

start page

• 124

end page

• 152

volume

• 6

issue

• 3

URL

• http%3A%2F%2Fdx.doi.org%2F10.1257%2Fmac.6.3.124

user-defined tag

• 8 Decent Work and Economic Growth
• 9 Industry, Innovation and Infrastructure