Competition Effects of Innovation under Uncertain Times

A special issue of Economies (ISSN 2227-7099).

Deadline for manuscript submissions: closed (31 December 2022) | Viewed by 3733

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Guest Editor
Southampton Business School, University of Southampton, Southampton, Building 2, Highfield Campus, Southampton SO17 1BJ, UK
Interests: timeseries econometrics; economic growth; spatiotemporal econonometrics; nonlinear modellling in economics and finance; stochastic environment and demography; financial market volatility under uncertainty
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Guest Editor
Roehampton Business School, University of Roehampton, London, UK
Interests: Innovation; technical change; banking and (digital) finance; growth; political economy

Special Issue Information

Dear Colleagues,

Competition has a double-edged effect: in a relatively financially secured environment, an enhanced level of competition can spur innovation propensity, whereas at persistently uncertain times, such as COVID-19 (see, for instance, Borio, 2020), greater competition can dampen innovation proclivity. Uncertainty has an embedded cost in the form of unpredictability of returns from an investment, and hence, any investment in an innovative venture will be treated with extreme caution. Unfortunately, we are living in a world of persistent uncertainty—before the end of one crisis, another crops up, be it in the form of an endogenous event such as financial crisis or an exogeneous one, such as COVID-19. In this context, corporations need to be resilient; they may engage in strategic innovation to counter competition effects. Figure 1 below presents the interactive effects of competition on innovation under uncertainty, when both firm and industry level factors respond to policy interventions. Conventional theoretical and empirical literature (such as Aghion et al. (2005); Aghion et al. (2013); Hasmi (2013), Cornaggia et al. (2015)) show that competition and innovation may share varied relationships—inverted U-shaped, positive, negative, and even an insignificant one. However, under persistence uncertainty, the observed relationship may define one relationship better than the other.

A number of factors may govern competition and innovation relationships, such as the role of institutional quality (Aghion et al. 2013), the size of the corporations (Beck et al., 2008), which will be central in characterizing the shock absorption and survival tenacity of corporations, and whether corporations are local (Tian and Han, 2019).

This Special Issue invites both theoretical and empirical work, in any area of economics and finance, to provide robust evidence on a particular direction and shape of the relationship between competition and innovation under uncertainty. Empirical papers need to draw on an existing theory or build one to design their empirical strategies. In particular, we are looking for contributions which focus on but are not limited to the competition and innovation relationship in the following aspects:

  • The role of uncertainty in the competition–innovation relationship in the financial sector;
  • Industry innovation and banking competition;
  • Firm/Industry innovation and competition;
  • Applications to Greentech and Fintech.

Both theoretical and empirical (using either secondary and/or primary data) work is welcome.

Aghion, P., Bloom, N., Blundell, R., Griffith, R., & Howitt, P. (2005). Competition and innovation: An inverted-U relationship. The Quarterly Journal of Economics, 120(2), 701–728.

Aghion, P., Van Reenen, J., & Zingales, L. (2013). Innovation and institutional ownership. American Economic Review, 103(1), 277–304.

Beck, T., Demirguc-Kunt, A., & Maksimovic, V. (2008). Financing patterns around the world: Are small firms different? Journal of Financial Economics, 89(3), 467–487

Benfratello, L., Schiantarelli, F., & Sembenelli, A. (2008). Banks and innovation: Microeconometric evidence on Italian firms. Journal of Financial Economics, 90(2), 197–217.

Borio, C. (2020). The Prudential Response to the COVID-19 Crisis. Bank of International Settlements.

Cornaggia, J., Mao, Y., Tian, X., & Wolfe, B. (2015). Does banking competition affect innovation? Journal of Financial Economics, 115(1), 189–209.

Hashmi, A. R., 2013, Competition and innovation: the inverted-u relationship revisited, Review of Economics and Statistics, 95, 1653–1668

Tian, L., & Han, L. (2019). How local is local? Evidence from bank competition and corporate innovation in U.S. Review of Quantitative Finance and Accounting, 52(1), 289–324.

Prof. Dr. Tapas Mishra
Dr. Mamata Parhi
Guest Editors

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Published Papers (1 paper)

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11 pages, 722 KiB  
Article
The Competitive Advantage of Furniture SMEs in East Java: The Role of Aggressiveness in Entrepreneurship Orientation
by Ardianus Laurens Paulus and Yustinus Budi Hermanto
Economies 2022, 10(6), 139; https://doi.org/10.3390/economies10060139 - 14 Jun 2022
Cited by 8 | Viewed by 2975
Abstract
This paper analyzes the dimensions of entrepreneurial orientation in Furniture SMEs in East Java, Indonesia, towards competitive advantage. This study uses a quantitative approach with the survey method. This study uses primary data that is self-reported using a self-administered survey by distributing questionnaires [...] Read more.
This paper analyzes the dimensions of entrepreneurial orientation in Furniture SMEs in East Java, Indonesia, towards competitive advantage. This study uses a quantitative approach with the survey method. This study uses primary data that is self-reported using a self-administered survey by distributing questionnaires directly to 84 owners of small and medium enterprises (SMEs) Furniture in Western East Java, Indonesia. A measurement used the structural equation model (SmartPLS 3.0) to analyze data. Five hypotheses were proposed, and only four had positive significant and positive effects on competitive advantage, that is, the influence of entrepreneurial orientation consisting of proactiveness, innovativeness, aggressiveness, and autonomy. In contrast, the hypothesis related to risk-taking towards the competitive advantage of SMEs Furniture has no positive and significant effect. The findings of this study show that the dominant influence of the entrepreneurial orientation dimension is aggressiveness. The theoretical implication of this research is that furniture business players need to continuously improve their aggressiveness in entrepreneurship according to the theoretical findings in this study, such as introducing innovative products made from local materials and following market trends. This research adds to the theory of aggressiveness in entrepreneurship to encourage innovations that will make industries that use local natural resources more competitively and help government policies. Aggressiveness is required by the furniture business to improve competitiveness for a labor-intensive industry with reliable local content to spur economic growth in Indonesia. Full article
(This article belongs to the Special Issue Competition Effects of Innovation under Uncertain Times)
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