Competencia, concentración de mercado e innovación en Ecuador
| Autor | Hector Alberto Botello, Isaac Guerrero Rincón |
| Páginas | 16-33 |
Ecos de Economía: A Latin American Journal of Applied Economics | Vol. 23 | No. 48 | 2019
ISSN 1657-4206 e-ISSN 2462-8107 Vol. 19 No. 42 PP. 4-18 DOI: 10.17230/ecos.2015.40.2ISSN 1657-4206 e-ISSN 2462-8107 Vol. 23 No. 48 PP. 16-33 DOI: 10.17230/ecos.2019.48.2
Research Article
compeTiTion, markeT concenTraTion
and innovaTion in ecuador
Competencia, concentración de mercado
e innovación en Ecuador
Hector Alberto Botello Peñalozaa e Isaac Guerrero Rincónb
Abstract
The objective is to determine how market concentration aects firms’ decisions
to innovate. With company-level data l from the 2010 Ecuadorian economic
census , a probabilistic/linear model was calculated with correction for selection
bias. Ecuadorian companies have a limited innovation capability and there is a
persistence in market concentration. The estimates confirm the theory of market
power in the propensity to innovate for both models. Consequently, increased
market share leads to an increase in the likelihood of innovation, thanks to the
ability to exploit the gains from these processes.
Resumen
El objetivo es determinar cómo la concentración del mercado afecta a la decisión
de las empresas de innovar. Con datos a nivel de empresa del censo económico
2010 del Ecuador, se calcula un modelo probabilístico y lineal con corrección del
sesgo de selección. Existe una baja capacidad de innovación de las empresas
ecuatorianas y una persistencia en la concentración del mercado. Las estimaciones
confirman la teoría del poder de mercado en la propensión a innovar para ambos
modelos. Por consiguiente, el aumento de la cuota de mercado conduce a un
aumento de la probabilidad de innovación, gracias a la capacidad de explotar
los beneficios de estos procesos.
Keywords: Business growth,
Highgrowth companies, Job
creation, Entrepeneurship,
Innovation.
Palabras clave: Crecimiento
empresarial, Empresas de alto
crecimiento, Creación de empleo,
Emprendimiento, Innovación.
JEL Classification: D22, L26, M21,
O3, O54.
Received: 21/05/2019
Accepted: 01/10/2019
Published: 29/11/2019
a. Investigador Universidad Industrial de
Santander
hectoralbertobotello@gmail.com
Orcid: 0000-0002-7795-2590
b. Profesor titular Universidad Industrial de
Santander
iguerrin@uis.edu.co
Orcid: 0000-0001-5794-2742
PP 18 | 83
Ecos de Economía: A Latin American Journal of Applied Economics | Vol. 23 | No. 48 | 2019
Competition, market concentration and innovation in Ecuador.
1. Introduction
Due to global competition, firms have been forced to focus on new lines of business by introducing
product or process innovations in their production chains (Ahmad et al., 2018). They do this in order to
gain a competitive advantage through increased eiciency and profitability, seeking to increase their
market shares through the creation of a better reputation. The Organisation for Economic Co-operation
and Development (OECD) reports show that firms that innovate continuously have the most skilled
workers, receive the highest wages and have the most eicient production systems (Gao et al. 2017).
In this sense, to evaluate the causes by which companies undertake innovation processes of
goods or services has been a recurrent theme in the literature in developed countries. , In general,
positive relations have been found between internal characteristics of the company like size, age,
economic sector, and location among others (Mohr, 1969; Tavassoli, 2015; Hermosilla & Wu, 2018).
The analysis of these determinants in developing countries, especially in Latin America, has been
abundant in recent years. Morales, Ortíz Riaga, & Arias Cante (2012) reviewed a set of papers on the
determinants of innovation in Latin America. They found that factors related to innovation systems
have a considerable impact within organizations. These national systems provide guarantees and
facilities that can influence organizations in the acquisition and development of their capabilities.
For many companies, innovation is an internal process explained by the complexity of the national
conditions within which they emerge.
The role of market concentration in innovative activities is found in the debate from the Schumpeterian
and Arrow point of view. The first promulgates that lack of competition is beneficial for innovation
activities, given that monopolistic companies can more easily perform R&D activities as they face
less market uncertainty and have larger and more stable funds. On the other hand, Arrow (1962)
asserts that competitive environments stimulate innovation; the monopolistic company does not need
to innovate as it has secured the market based on its size and dynamism.
For Schumpeter, imperfect competition provides the best environment for internalizing the
benefits of R&D, the so-called market power hypothesis (Galbraith, 1952). For example, Scherer
(1967a), and Levin et al. (1985) find for the US that maximum intensity occurs at 50-60% of the
market concentration level. However, the concentration-innovation relationship is sensitive to the
characteristics of the branch of activity studied. Scott finds market concentration can only explain
a 1.5 percent variation in R&D intensity. From another point of view, there are studies that relate
market size with innovative activity, such as Hermosilla & Wu (2018), which relate market size with
firms’ propensity to innovate. They show that in sectors with larger market sizes, innovation increases
thanks to support between suppliers and vertical integration.
In this order of ideas, many prominent scholars in the literature are interested in understanding
the empirical relationship of this Arrow vs Shumpeter debate. For example, the seminal paper of
Aghion et al. (2005) found an inverted U-shaped relationship between concentration and innovation,
whereas Beneito, Rochina-Barrachina & Sanchis (2017) found a linear positive relationship. However,
these relations have not been studied in the context of a developing country such as in Latin America.
For this reason, the objective of this research is to fill this gap in the literature by determining how
market concentration aects companies’ decision to innovate in Ecuador. The data are used at
the enterprise level using a probabilistic and linear model with selection bias correction. The 2010
Ecuadorian economic census is the data source used for the estimation.
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