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Product Market Competition and Upstream Innovation: Evidence from the U.S. Electricity Market Deregulation

Author

Listed:
  • Paroma Sanyal

    (Federal Communications Commission)

  • Suman Ghosh

    (Florida Atlantic University)

Abstract
This paper studies the innovation response of upstream technology suppliers when their downstream buyers transition from regulation to competition. By modeling the impact of the 1990s U.S. electricity deregulation on patenting, we find that after deregulation, the net competition effect (comprising the pure competition and the escape competition effect) decreased innovation by 18.3% and the appropriation effect increased innovation by 19.6%. Other deregulation factors have led to a 20.6% decline. In aggregate, after deregulation, innovation by the upstream technology suppliers has declined by 19.3%, and upstream innovation quality and generality have declined as well. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Paroma Sanyal & Suman Ghosh, 2013. "Product Market Competition and Upstream Innovation: Evidence from the U.S. Electricity Market Deregulation," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 237-254, March.
    • Handle: RePEc:tpr:restat:v:95:y:2013:i:1:p:237-254
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    More about this item

    Keywords

    innovation; patents; competition; electricity deregulation;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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