Abstract
The objective is to determine how market concentration affects firms’ decisions to innovate. With company-level data l from the 2010 Ecuadorian economic census , a probabilistic/linear model was calculated with correction for selection bias. Ecuadorian companies have a limited innovation capability and there is a persistence in market concentration. The estimates confirm the theory of market power in the propensity to innovate for both models. Consequently, increased market share leads to an increase in the likelihood of innovation, thanks to the ability to exploit the gains from these processes.
Highlights
Due to global competition, firms have been forced to focus on new lines of business by introducing product or process innovations in their production chains (Ahmad et al, 2018)
The objective of this research was to determine how market concentration affects the decision of firms to innovate
Data were used at the level of the Ecuadorian firm using a probabilistic and linear cross-sectional model with selection bias correction
Summary
Firms have been forced to focus on new lines of business by introducing product or process innovations in their production chains (Ahmad et al, 2018). The Organisation for Economic Co-operation and Development (OECD) reports show that firms that innovate continuously have the most skilled workers, receive the highest wages and have the most efficient production systems (Gao et al 2017) In this sense, to evaluate the causes by which companies undertake innovation processes of goods or services has been a recurrent theme in the literature in developed countries. In general, positive relations have been found between internal characteristics of the company like size, age, economic sector, and location among others (Mohr, 1969; Tavassoli, 2015; Hermosilla & Wu, 2018) The analysis of these determinants in developing countries, especially in Latin America, has been abundant in recent years. Innovation is an internal process explained by the complexity of the national conditions within which they emerge
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