Technological Opportunity and the Relationship Between Innovation Output and Market Structure

This study examines influences of technological opportunity on the relationship between market structure and the innovation output of different-size firms. A simultaneous-equations model is specified and estimated separately for technologically progressive and technologically unprogressive industries. The study finds that innovation activities of small firms and large firms bear different relationships to market structure, in part resulting from interindustry differences in technological opportunity. In technologically progressive industries, innovation output (especially of small firms) is lower in the presence of high concentration and is increased substantially by high R&D intensity. Large-firm innovation output has a positive effect on industry concentration, but only in technologically unprogressive industries. Copyright (C) 2005 John Wiley & Sons, Ltd.