Journal Article

Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms

Richard Blundell, Rachel Griffith and John van Reenen

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 66, issue 3, pages 529-554
Published in print July 1999 | ISSN: 0034-6527
Published online July 1999 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00097
Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms

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This paper examines the empirical relationship between technological innovations, market share and stock market value. New developments in the estimation of dynamic count data models are used to control for unobserved firm specific heterogeneity. We find a robust and positive effect of market share on observable headcounts of innovations and patents although increased product market competition in the industry tends to stimulate innovative activity. Furthermore, the impact of innovation on market value is larger for firms with higher market shares. We argue that our results are consistent with models where high market share firms have incentives to pre-emptively innovate.

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Subjects: Economics

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