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Hearing Instruments Essay

4904 words - 20 pages

Dynamics and innovations:
Hearing instrument B

Erasmus School of Economics
Department of Applied Economics

Written by
Student names: Sang van Tran
Zhi Yuan Lin
Student numbers: 318938

Ajay Bhaskarabhatla



This study argues that patents explain the extent of innovation between incumbent firms and new entrants in the hearing aid industry. In the year 1953 the transistor was introduced to the hearing aid industry, the knowledge behind the transistor was free of ...view middle of the document...

On the other hand radical innovations is based upon a major change in an existing products, which can create a whole new market and potential applications. Radical innovations can possibly create difficulties for incumbents firms and be a basis for successful entry of new firms or even the redefinition of an industry. The transistor can be seen as a radical innovation. With the radical innovation of the transistor our whole economy changed. The reason behind this is that the transistor is used in almost any electricity driven product that you can imagine. This is why the transistor is acknowledged by many economists as one of the biggest radical innovation in history.
This project is based on the innovativeness of firms in the hearing aid industry. The reason why this particularly industry has been chosen is because this is the first industry where transistors were applied to. This research contributes to the understanding of how the extent of innovation between the incumbent firms and new entrants relates to each other in the hearing aid industry.
Since the license of transistors was free of charge, it was accessible for the incumbent and the new firms in the industry. With this research there will be determined whether incumbents firms or new entries are more innovative and whether the incumbent firms or the new entrants were more capable in using innovations more efficient.
This research focuses on the innovativeness of the firms in the hearing aid industry. The level of innovativeness between the incumbent and entrant firms will be measured by the number of patent each firm has filed for. The following research question will be answered by the empirical analysis:
What is the extent of innovation at incumbent and new entrant firms in the hearing aid industry?
To answer this question the following hypotheses will be formulated:
Hypothesis 1
The incumbent firms in the hearing aid industry are more innovative than the new entrants.
Hypothesis 2
The extent of innovation and the size of a firm are positive related to each other.
The remainder of this research is structured as followed. First, an review of the literature will be given. Second, the data and methods will be described. Followed by the interpretation of the results and at last a summarization of the results and a conclusion.
2. Literature
Innovation has a positive impact and contribution to economic growth (Solow, 1956; Romer, 1986). Most innovations are made possible with the protection of patents. In this way, the patent system contributes towards an increasing rate of innovations and a positive effect on technological innovations (Mansfield, 1986). Research shows that some of the product innovations in history would not have been introduced if it were not for patents (Schwartz M. and Wagner, 1981).
Every Innovation has different impact and reactions on incumbent firms and new entrant in an industry. Incumbent firms and new entrants in an industry all react on...

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