| dc.description.abstract | By means of the Cournot model setting, we analyze how a firm invests on product differentiation innovation. The research is important, because we are now in a low-profit economic environment due to strict competition.
The main findings of this research are as follows. Firstly, regardless of horizontal or vertical differentiation case, an investment an differentiation innovation could certainly raise the firm’s profit. Secondly, the market structure, i.e., the number of firms would affect the firm’s incentive of investment on differentiation innovation.
In sum, there may exist an optimal investment on differentiation innovation for the firm in either horizontal or vertical differentiation case . In addition, the effects of the market structure on the investment are ambiguous. When the number of firms is small, more firms (or more competitive) will increase the firm’s incentive of investment. On the contrary, as the number of firms is large, i.e., a relatively competitive environment, more firms will reduce the firm’s investment on differentiation innovation. | en_US |