Abstract
The economic literature suggests that there is an inverted-U type of relationship between innovation and product market competition. Existing empirical studies assume a quadratic functional form while estimating the relationship between the two variables. Using data on the Indian manufacturing industry, this article contributes by using a semi-parametric approach to test the ‘Inverted-U’ hypothesis without assuming a priori functional form. The estimation results suggest that the functional form of the relationship is contingent upon the choice of product market competition indicator in the model. When product market competition is defined as overall price competition, the empirical evidence confirms the inverted-U hypothesis. This implies that both escape competition and the Schumpeterian effect are observed as price competition increases. However, when product market competition is defined as domestic competition, only the escape competition effect is observed. JEL Codes: L10, L60, O30, O33, F10
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
