Working Paper: CEPR ID: DP8289
Authors: Tobias Kretschmer; Eugenio J. Miravete; Jose C. Pernas
Abstract: Liberalization of the European automobile distribution system in 2002 limits the ability of manufacturers to impose vertical restraints, leading to a substantial increase in competitive pressure among dealers. We estimate an equilibrium model of profit maximization to evaluate how dealers change their innovation adoption strategies following the elimination of exclusive territories. Using French data we evaluate the existence of complementarities between the adoption of software applications and the scale of production. Firms view these innovations as substitutes and concentrate their effort in one type of software as they expand their scale of production. Results are robust to the existence of unobserved heterogeneity.
Keywords: competitive pressure; complementarity; product innovation; process innovation
JEL Codes: C35; L86; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Liberalization of the European automobile distribution system (L81) | Competitive pressure among dealers (D43) |
| Competitive pressure among dealers (D43) | Sales of dealers (L81) |
| Competitive pressure among dealers (D43) | Likelihood of adopting HR software (C88) |
| Liberalization of the European automobile distribution system (L81) | Optimal dealer scale (D41) |
| Optimal dealer scale (D41) | Adoption of applications development software (apps) (C88) |
| Adoption of applications development software (apps) (C88) | Adoption of HR software (M51) |