The effect of labor and product market structure on industrial innovation

The present dissertation consists on three related studies on the determinants of firms R&D behavior. The focus is on how market structure (both product market structure and labor market one) affects R&D spending. In chapter 1 I provide an original approach to the profusely studied question of the relationship between R&D and market competition by distinguishing between long-run and short-run R&D decisions and by adopting an econometric strategy able to distinguish between both. In chapter 2 I present an empirical study of the effect of labor market rigidities on R&D, which to my knowledge, has never been done before. The results suggest that innovative behavior of firms is likely to be affected by how easy it is to hire or fire workers. This finding has important policy implications: labor market policies may help increasing firms' R&D spending in countries with low technological effort. Finally the third paper of the dissertation analyzes the determinants of the decision by innovating firms to invest in internal or external R&D. I present econometric evidence showing that the composition of firm's R&D spending is related to the type of innovation that the firm produces and to the market structure in which the firm operates.