Hyo Kang, Assistant Professor, USC Marshall School of Business
This paper examines how price competition in the product market affects the intensity and breadth of innovation. I assemble a unique data set comprising all 461 prosecuted collusion cases in the United States from 1975 through 2016, where I match 1,818 collusive firms to firm level data on innovation. Empirical results from a difference in differences methodology show a negative causal relationship between price competition and innovation. When collusion suppressed price competition, colluded firms increased patent filings by 20.5% and top quality patents by 16&. A significant portion of these patents are attributable to fundamental innovation activities since innovation inputs R&D investment and the number of unique patenting inventors increased in tandem by 15.2% and 22.9%, respectively. Furthermore, firms broadened their scope of innovation by exploring new technological areas; the number of patented technology classes increased by 11.9%. When competition was restored by collusion breakup, the increased and broadened innovation activities reverted to their previous levels. The effects were greater for collusion that was stronger and in fast growing industries. I shed light on market profitability and firm financial constraints as key economic mechanisms driving the trade off between price competition and innovation growth.
Speaker bio
Hyo Kang is an Assistant Professor of Management and Organisation at USC Marshall School of Business. His research interest broadly lies in firm strategy and business economics, with a focus on innovation and entrepreneurship. The key question in Hyo’s research is how firms strategically manage their innovation processes and outcomes in response to ever changing business environments. He explores three different types of competition and how relevant policies reshape firm innovation strategies: Product market competition, Competition for labour forces, and Competition for innovation and intellectual property rights.
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Event timings
Date:
16 March 2022
Start Time:
15:00
End Time:
16:00