Abstract
This chapter applies the “bounds approach” to industry structure proposed by Sutton ((1991), (1998)). Part of the novelty in this exercise is that we work on the finest possible level of disaggregation. Also, we identify demand substitutability from direct industry sources. This allows us to carefully define markets, and identify R&D intensity for each of them. We then compare the relationship between market structure and innovation in Europe and the US. It emerges that both industries share many common features. In particular, it appears that the intensity of competition is similar across both side of the Atlantic. However, the European chemical industry is characterised by a lower degree of product homogeneity when compared to its US counterpart.
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