Relationship between Competition and Innovation

Topic 

Relationship between Competition and Innovation

Instructions

Write a paper on the Relationship between Competition and Innovation

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Competition is considered as an outcome of liberalization purposed to ensure efficiency, and as a result, foster economic growth (Gilbert, 2006). However, evidence shows that perfect competition does not translate into higher returns; increasing returns are considered the central factor in the growth process (Crosswhite, 2003). As such, monopoly incentives serve as the main drivers of innovation in the creation of products and services (Aghion et al., 2005). Therefore, from Schumpeter’s perspective, it is conceivable that some relationship exists between competition and innovation. Schumpeter’s Theory of innovation postulates that innovation serves as the primary reason why actors in a particular industry augment their investment through innovation (Aghion and Howitt, 1998).

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