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Title: An Analytical Modelling Approach for Assessing the Impact of Competition on a Homogenous Product Firm’s Investment Decision in Innovation
Authors: Adhikari, Arnab
Paul, Samit
Keywords: Cournot model
Investment decision
Issue Date: 2018
Publisher: SCOPUS
Global Business Review
Sage Publications India Pvt. Ltd
Series/Report no.: 19(3_suppl)
Abstract: Since the 2000s, the world has experienced a phenomenal growth of innovation initiatives in the homogenous product business. In this context, market competition is considered as one of the most important factors that influence innovation. Still, there is an absence of studies that capture the impact of competition on the innovation activities of homogenous product firms. Also, there is a dearth of analytical works that facilitate the theorization of the impact of competition on a firm�s innovation activities. It motivates us to propose an analytical methodology to assess the impact of the competition on a firm�s innovation in the context of the homogenous product market. We present a quantity competition based Cournot model to determine a homogenous product firm�s optimal output quantity and profitability. Here, we introduce a novel �innovation factor� that describes a homogenous product firm�s innovation capability. We also devise the criteria regarding firm�s incentive to make an investment decision in innovation activity. According to our findings using analytical modelling and numerical analysis, a firm�s profitability decreases with increasing degree of competition. Also, a firm�s incentive to engage in innovation activity depends on the degree of competition, its innovation capability and fixed costs associated with the innovation. � 2018, � 2018 International Management Institute, New Delhi.
Description: Adhikari, Arnab, Indian Institute of Management, Ranchi, Suchana Bhawan, Audrey House Campus, Meur’s Road, Ranchi, India; Paul, Samit, Indian Institute of Management, Calcutta, Diamond Harbour Road, Joka, West Bengal, India
ISSN/ISBN - 09721509
DOI - 10.1177/0972150918760057
Appears in Collections:Finance and Control

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