Discussion paper

DP3293 Time Based Competition and Innovation

By choosing their organizations, firms trade-off productive efficiency and time spent in implementing innovation. We embed such a productivity/reactivity trade-off in a growth model with creative destruction. We first highlight the specific impact of time in firm competition: in addition to weighing costs and benefits of late adoption, firms use time as a strategic variable through the possibility of overtaking their competitors. Due to this very specificity of time competition, multiple equilibria may emerge: when firms adopt quickly, their stock market valuation is larger, and they innovate more and produce less. Moreover, the IT revolution is shown to favour quick implementation via a general equilibrium feedback on organizational choice.


Thesmar, D (2002), ‘DP3293 Time Based Competition and Innovation‘, CEPR Discussion Paper No. 3293. CEPR Press, Paris & London. https://cepr.org/publications/dp3293