Innovation, Competition, and Incentives: Evidence from Uruguayan firms

Produced by: 
Universidad Alberto Hurtado
Available from: 
March 2019
Paper author(s): 
Ramiro de Elejalde
Carlos J. Ponce
Flavia Roldán
Microeconomics - Competition - Productivity

Using a sample of manufacturing firms in Uruguay, this paper studies the eect of product market competition on innovative activities, labor practices and the provision of incentives within firms. Our estimates show that a higher level of product market competition: (i) decreases innovative expenditures, (ii) increases the number of innovations per dollar spent on innovative activities, and: (iii) leads firms to implement incentive payment schemes based on employee performance. These results suggest that, in developing economies, firms react to a higher level of product market competition by providing internal incentives that ultimately lead to significant increases in the productivity of their innovative outlays.


Research section: 
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