6533b874fe1ef96bd12d5fc7

RESEARCH PRODUCT

Simultaneity between strategic variables: Production, innovation, and product differentiation

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This paper aims to analyze the existence of simultaneous effects among the variables production, product differentiation, and innovation. Microeconomic data from a sample of 2,160 firms are used as a base. Empirical results show that a positive correlation exists from innovation to product differentiation, thus showing that it is in the process of production itself, through technical improvements, where product differentiation is determined. On the other hand, no positive effect exists from product differentiation to innovation, i.e., once technical improvements have been established, firms exchange the barriers to entry created by brand image for the real barriers established by innovation itself. Lastly, the importance of the firm size in explaining the other endogenous variables analyzed is confirmed.