This paper investigates the relationship between product market competition (PMC) and innovation. A growth model is … reduce innovation incentives for laggards. There are four key predictions. First, the relationship between product market … competition (PMC) and innovation is an inverted U-shape. Second, the equilibrium degree of technological neck-and-neckness' among …

effect on innovation. We develop a simple "trapped factor" model of innovation that is consistent with these empirical …

-run growth by increasing the profit from innovation. In the short run, factors of production must be reallocated inside firms …, which lowers the opportunity cost of innovation, generating an additional trapped factor effect. Starting from a baseline …