EVALUATION OF THE IMPACT OF FIRM LEVEL COMPETITION ON RUSSIAN INNOVATION
DOI:
https://doi.org/10.17059/ekon.reg.2023-2-12Keywords:
SMEs, Russia, innovation, competition, foreign license Technology (IP), logit model, institutionsAbstract
Innovation is an essential component of a company’s survival in this competitive world of business. Firms in free and competitive marketplaces are compelled to adopt more efficient production techniques and provide customers with new and improved products. This research examines the impact of competition on innovation in free and competitive marketplaces. The study is motivated by the Russian government’s goal of increasing productivity of small and medium-sixed enterprises (SMEs) to 32% of gross domestic product. The study employed the Logit model to analyse the data from the World Bank Enterprise Survey. The findings reveal that fierce competition has a significant negative effect on innovation. Specifically, competition reduces product, process, and new product innovation by 5%, 3%, and 3.5% respectively. The step-by-step innovation model indicates that competition stimulates innovation in firms operating in contestable markets. Additionally, higher levels of competition negatively affect new product innovation. These results suggest that intense competition may impede firms’ ability to innovate, particularly in the areas of product development, process improvement, and introducing new products. However, competition acts as a driving force that compels firms to innovate in order to maintain their competitiveness in the market. Consequently, increased competition may lead to a diversion of resources towards research and development (R&D), potentially limiting firms’ capacity to introduce new products.
References
Abramov, A., Radygin, A. & Chernova, M. (2017). State-owned enterprises in the Russian market: Ownership structure and their role in the economy. Russian Journal of Economics, 3(1), 1-23. DOI: https://doi.org/10.1016/j.ruje.2017.02.001
Aghion, P., Bechtold, S., Cassar, L. & Herz, H. (2018). The causal effects of competition on innovation: Experimental evidence. The Journal of Law, Economics, and Organization, 34(2), 162-195. DOI: https://doi.org/10.1093/jleo/ewy004
Aghion, P., Bloom, N., Blundell, R., Griffith, R. & Howitt, P. (2005). Competition and innovation: An inverted-U relationship. The quarterly journal of economics, 120(2), 701-728. DOI: https://doi.org/10.1093/qje/120.2.701
Aghion, P., Blundell, R., Griffith, R., Howitt, P. & Prantl, S. (2009). The effects of entry on incumbent innovation and productivity. The Review of Economics and Statistics, 91(1), 20-32. DOI: http://doi.org/10.3386/w12027
Aghion, P., Harris, C. & Vickers, J. (1997). Competition and growth with step-by-step innovation: An example. European Economic Review, 41(3-5), 771-782. DOI: https://doi.org/10.1016/S0014-2921(97)00036-6
Aghion, P., Harris, C., Howitt, P. & Vickers, J. (2001). Competition, imitation and growth with step-by-step innovation. The Review of Economic Studies, 68(3), 467-492. DOI: https://doi.org/10.1111/1467-937X.00177
Axarloglou, K. (2004). New products and market competition. International Advances in Economic Research, 10(3), 226-234. DOI: https://doi.org/10.1007/BF02296217
Bessonova, E. & Gonchar, K. (2019). How the innovation-competition link is shaped by technology distance in a high-barrier catch-up economy. Technovation, 86, 15-32. DOI: https://doi.org/10.1016/j.technovation.2019.01.002
Canare, T. & Francisco, J. P. (2021). Does Competition Enhance or Hinder Innovation? Journal of Southeast Asian Economies, 38(1), 24-50. http://dx.doi.org/10.2139/ssrn.3423878
Correa, J. A. (2012). Innovation and competition: An unstable relationship. Journal of Applied Econometrics, 27(1), 160-166. DOI: https://doi.org/10.1002/jae.1262
Cuijpers, M., Guenter, H. & Hussinger, K. (2011). Costs and benefits of inter-departmental innovation collaboration. Research Policy, 40(4), 565-575. DOI: https://doi.org/10.1016/j.respol.2010.12.004
Dasgupta, P. & Stiglitz, J. (1980). Uncertainty, industrial structure, and the speed of R&D. The Bell Journal of Economics, 11(1), 1-28. DOI: https://doi.org/10.2307/3003398
Dikova, D., Panibratov, A., Veselova, A. & Ermolaeva, L. (2016). The joint effect of investment motives and institutional context on Russian international acquisitions. International Journal of Emerging Markets, 11(4). DOI: https://doi.org/10.1108/IJoEM-04-2016-0105
Fellner, W. (1951). The influence of market structure on technological progress. The Quarterly Journal of Economics, 65(4), 556-577. DOI: https://doi.org/10.2307/1882579
Freeman, R. N. (1987). The association between accounting earnings and security returns for large and small firms. Journal of accounting and economics, 9(2), 195-228. DOI: https://doi.org/10.1016/0165-4101(87)90005-X
Godin, B. (2009). National innovation system: The system approach in historical perspective. Science, Technology, & Human Values, 34(4), 476-501. DOI: https://doi.org/10.1177/0162243908329187
Hashmi, A. R. (2013). Competition and innovation: The inverted-U relationship revisited. Review of Economics and Statistics, 95(5), 1653-1668. DOI: https://doi.org/10.1162/REST_a_00364
Lindsey, B. & Teles, S. M. (2017). The captured economy: How the powerful enrich themselves, slow down growth, and increase inequality. Oxford University Press, 188.
Longenecker, C. O. & Popovski, S. (1994). Managerial trials of privatization: Retooling Russian managers. Business Horizons, 37(6), 35-44. DOI: https://doi.org/10.1016/S0007-6813(05)80243-5
Mazzucato, M. (2018). Mission-oriented innovation policies: challenges and opportunities. Industrial and Corporate Change, 27(5), 803-815. DOI: https://doi.org/10.1093/icc/dty034
Mierin, L. A., Korostyshevskaya, E. M. & Ragimova, N. S. (2019). The Impact of Monopolies on Small Business Development in Russia. American Journal of Economics and Sociology, 78(5), 1201-1228. DOI: https://doi.org/10.1111/ajes.12303
Moen, Ø., Tvedten, T. & Wold, A. (2018). Exploring the relationship between competition and innovation in Norwegian SMEs. Cogent Business & Management, 5(1), 1564167. DOI: https://doi.org/10.1080/23311975.2018.1564167
Musacchio, A., Lazzarini, S. G. & Aguilera, R. V. (2015). New varieties of state capitalism: Strategic and governance implications. Academy of Management Perspectives, 29(1), 115-131. DOI: https://doi.org/10.5465/amp.2013.0094
Panibratov, A. & Kalotay, K. (2009). Russian outward FDI and its policy context. Vale Columbia Center on Sustainable International Investment, 9. DOI: https://doi.org/10.7916/D84173W5
Porter, M. E. (1990). The competitive advantage of nations Harvard business review. Harvard Business Review, 91.
Porter, R. H. (1983). A study of cartel stability: the Joint Executive Committee, 1880-1886. The Bell Journal of Economics, 14(2), 301-314. DOI: https://doi.org/10.2307/3003634
Romer, P. M. (1990). Endogenous technological change. Journal of political Economy, 98(5, Part 2), S71-S102. DOI: https://doi.org/10.1086/261725
Spillan, J. E., Parnell, J. A., Panibratov, A. & Yukhanaev, A. (2021). Strategy and performance of Russian firms: An organisational capabilities perspective. European Journal of International Management, 15(1), 1-26. DOI: https://doi.org/10.1504/EJIM.2021.111913
Tang, J. (2006). Competition and innovation behaviour. Research policy, 35(1), 68-82. DOI: https://doi.org/10.1016/j.respol.2005.08.004
Tkacheva, O. A., Tsurak, L. A., Getmanova, I. A., Chistyakov, A. V. & Zakharov, S. V. (2017). New possibilities and tools for corporate strategic management for supporting its high competitiveness and economic effectiveness. European Research Studies Journal, 20(3B), 578-587. Retrieved from: https://www.um.edu.mt/library/oar/handle/123456789/32486
Xie, X., Zou, H. & Qi, G. (2018). Knowledge absorptive capacity and innovation performance in high-tech companies: A multi-mediating analysis. Journal of business research, 88, 289-297. DOI: https://doi.org/10.1016/j.jbusres.2018.01.019
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 James Okrah
This work is licensed under a Creative Commons Attribution 4.0 International License.
