Competition, Innovations and the Inverted-U Relationship

Only abstract. Paper copies of master’s theses are listed in the Helka database (http://www.helsinki.fi/helka). Electronic copies of master’s theses are either available as open access or only on thesis terminals in the Helsinki University Library.Vain tiivistelmä. Sidottujen gradujen saatavuuden voit tarkistaa Helka-tietokannasta (http://www.helsinki.fi/helka). Digitaaliset gradut voivat olla luettavissa avoimesti verkossa tai rajoitetusti kirjaston opinnäytekioskeilla.Endast sammandrag. Inbundna avhandlingar kan sökas i Helka-databasen (http://www.helsinki.fi/helka). Elektroniska kopior av avhandlingar finns antingen öppet på nätet eller endast tillgängliga i bibliotekets avhandlingsterminaler.The purpose of this study is to examine the relationship between competition and innovations. Making use of growth models where the incentive effects of competition on innovation, and consequently growth, are considered, the effect of competition on technological progress is examined. The interplay between competition and corporate governance and their combined effect on innovations are also examined. Furthermore, the interaction between R&D subsidies and competition and the additionality of an R&D subsidy are analytically elaborated as an extension to the already formulated model of an inverted U-shape relationship between competition and innovations. The three key hypotheses analyzed in this study are: 1) competition policy has important complementarities with R&D policy in the fostering of an innovative environment; 2) R&D subsidies should in all cases be carefully monitored; 3) the additionality of R&D subsidies tends to be strongest at moderate degrees of competition. The findings are that the degree of competition within the industry should be taken into account in the granting of R&D subsidies. A policy mix of R&D policy and competition policy may increase the additionality of an R&D subsidy. As for the monitoring of subsidies, the findings are that all forms of subsidies to R&D ventures should be carefully monitored. Finally, an R&D subsidy tends to have strongest additionality at moderate degrees of competition