Three Essays on Competition and Innovation

Information and communication technologies (ICT) are driving the modern innovation process. To better understand these dynamics, the current dissertation analyses the interactions between innovation and competition. The scope of this work can be divided into two areas: The first one deals with a question of how markets could be organized to produce the most optimal outcome. The second one analyses the feedback effects of innovative activity on competition and the organisation of economic activity. Regarding the impact of competition on innovation, an empirical analysis reveals that ICT- driven innovations dominate in concentrated industries, whereas innovations based on other technologies flourish in moderately competitive markets. This suggests that there are some features that make ICT-enabled innovations exceptional, compared to innovations based on other technologies. Concerning the impact of innovation, two findings are worth emphasising. First, as shown in a theoretical analysis, although profitable from an individual producer¿s perspective, the adoption of a technology increasing product variety across the entire industry erodes firms¿ payoffs. In addition, firms'' decisions with respect to the technology adoption are not always efficient from the social welfare point of view. Second, another empirical analysis included in this work reveals that ICT leads to more competition and facilitates the emergence of hybrid organization forms, subject to firm''s and industry''s characteristics. Although this dissertation reveals only a small piece of the complexity of the ICT-driven innovation process, it casts some new light on the importance of market structure for ICT- enabled innovation and the feedback effect of the technology on firms¿ environment. Interestingly, the outcomes of this thesis show that these interactions are often far from straightforward and in many cases counterintuitive.JRC.DDG.J.4-Information Societ