Competition & Innovation : New Evidence from US Patent and Productivity Data

Is there any evidence that innovation and technological progress are contained by competition and fostered by monopoly power? Our results based on a newly constructed dataset of US manufacturing industries observed over two decades suggest that this is not the case.On the contrary, using both patent statistics and productivity growth as alternative measures of innovation and technical change, we observe faster technological advances in more competitive markets. These results are robust to changes in the econometric techniques used to model nonlinearity in the competition-innovation relationship and to the inclusion of non-manufacturing industries in the estimation sample