Firm Size vis-à-vis Industry Size and Innovation in a Dominant Firm-fringes Oligopoly Model
| Published date | 01 February 2016 |
| Date | 01 February 2016 |
| Author | Surajit Bhattacharyya,Richa Shukla,K. Narayanan |
| DOI | 10.1177/0015732515614436 |
| Subject Matter | Articles |
Firm Size vis-à-vis Industry
Size and Innovation in a
Dominant Firm-fringes
Oligopoly Model
Richa Shukla1
Surajit Bhattacharyya2
K. Narayanan3
Abstract
This article explores the possibility of associating firm size vis-à-vis industry size
with firm-level R&D led-innovation and the resultant impact(s) on industry level
output and price. We consider an oligopolistic industry having one dominant firm
and some fringes. Innovation by the dominant firm is viewed both as a technologi-
cal breakthrough and as (cost) augmenting monetary expenditure. When innova-
tion is considered as technological breakthrough, then for the benevolent industry
leader, its scope for output expansion is more if R&D is induced by the industry
size vis-à-vis firm size. However, when R&D led innovation is seen as cost
augmenting, then the industry size induced innovation yields greater output if the
dominant firm acts as a Stackelberg leader. Therefore, we show that exploiting
the industry size renders a higher incentive to innovate for the industry leader in
terms of capacity expansion.
JEL: D21, D43, L13
Keywords
Innovation, dominant firm, fringes, Cournot oligopoly
Foreign Trade Review
51(1) 13–25
©2016 Indian Institute of
Foreign Trade
SAGE Publications
sagepub.in/home.nav
DOI: 10.1177/0015732515614436
http://ftr.sagepub.com
Corresponding author:
Surajit Bhattacharyya, Associate Professor of Economics, Department of Humanities and Social
Sciences, Indian Institute of Technology Bombay, Powai, Mumbai 400 076, India.
E-mails: surajitb@iitb.ac.in; surajit@hss.iitb.ac.in
1 Ph.D Scholar, Department of Humanities and Social Sciences, IIT Bombay, Mumbai.
2 Associate Professor of Economics, Department of Humanities and Social Sciences, IIT Bombay,
Mumbai.
3 Institute Chair Professor, Department of Humanities and Social Sciences, IIT Bombay, Mumbai.
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