We employ a dynamic market model with endogenous creation of submarkets to study the optimal product innovation … hazard rate of innovation. We find that under Markov Perfect Equilibrium behavior the firm with a larger market share on the … product has a larger incentive to engage in product innovation and might even achieve higher long run profit than its more …

homogeneous product. The firms invest in production capacities and simultaneously in R&D which determines their innovation rate … the cannibalization effect gives the smaller firm a higher innovation incentive. As a logical consequence we find that the …

We study in a dynamic framework how product innovation activities of a firm are influenced by its production capacity …

We analyze the effect of external financing and associated bankruptcy threat on the speed of product innovation in a … the R&D investment flow determines the distribution of the stochastic innovation time and the same time influences the … debt in order to speed up innovation. Furthermore, we show that, due to the existence of financial frictions, the …