American Economic Review: Vol. 102 No. 4 (June 2012)


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Competitive Pressure and the Adoption of Complementary Innovations

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Kretschmer, Tobias, Eugenio J. Miravete, and José C. Pernías. 2012. "Competitive Pressure and the Adoption of Complementary Innovations." American Economic Review, 102(4): 1540-70.

DOI: 10.1257/aer.102.4.1540


Liberalization of the European automobile distribution system in 2002 limits the ability of manufacturers to impose vertical restraints, leading to a substantial increase in competitive pressure among dealers. We estimate an equilibrium model of profit maximization to evaluate how dealers change their innovation adoption strategies following the elimination of exclusive territories. Using French data we evaluate the existence of complementarities between the adoption of software applications and the scale of production. Firms view these innovations as substitutes and concentrate their effort in one type of software as they expand their scale of production. Results are robust to the existence of unobserved heterogeneity. (JEL D24, K21, L21, L22, L62, O32)

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Kretschmer, Tobias (ISTO, Ludwig Maximilians U Munich and Ifo Institute, Munich)
Miravete, Eugenio J. (U TX)
Pernías, José C. (U Jaume I de Castellon)

JEL Classifications

D24: Production; Cost; Capital, Total Factor, and Multifactor Productivity; Capacity
K21: Antitrust Law
L21: Business Objectives of the Firm
L22: Firm Organization and Market Structure
L62: Automobiles; Other Transportation Equipment
O32: Management of Technological Innovation and R&D

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