In an industry where tons of firms all want to share one piece of cake, the competition will become very fierce. In a general sense, if a company wants to differentiate itself among all the competitors, it is believed to have its uniqueness which also means the firm should possess innovative features. But, is this the only relationship between innovation and completion? After reading Paul’s blogpost, I find out that the relationship between them is more complicated than that.
In a competitive market, the capacity of the firm determines how innovative the firm is. A large company can benefit form economics of scale thus they can easily access of capital market. This leads to lower incentives to make innovations than small firms. From another point of view, large firm are less willing to make innovation as it has a higher risk to make changes while small businesses often have small risk to make innovation. Therefore, it can be seen that, innovation depends on various factors instead of how competitive the market is.
Reference
http://www.ipdigit.eu/2010/09/what-is-the-link-between-competition-and-innovation/
