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ON THE INFLUENCE OF CONTEMPORARY COMPETITIVE POLICY ON THE INNOVATIVE ECONOMIC DEVELOPMENT

Sergey Chirikhin

Abstract

The article examines correlation between the existing principles of state competition policy and innovative economic development. A perfect competition model has been currently adopted as an ideal sample of the commodities market state, being characterized by a sufficient number of sellers and buyers, when none of them can decisively influence market prices. Consequently, countries endeavor to bring real markets conditions closer to this ideal state by competitive policy, that occur in dedicated state effort to reduce the market share of enterprises, including through their direct unbundling (fragmentation). Theoretical studies justify the position that the perfect competition market provides the best conditions for consumers to acquire goods by low prices, high standards of quality and service, intensive deployment of innovations by sellers, etc. However, the dedicated state effort to reduce the scale of activity of market actors patently contradict with the innovative economic development, as a number of modern empirical studies shows. Among these, the works of David L. Birch shows that the greatest innovation activity is inherent for gazelle companies, foremost among them, medium-sized businesses. According to studies based on the works of David L. Birch, such enterprises, representing from 3 to 10% of market participants, give about 50-80% of market capacity. Obviously, such a market structure does not meet the criteria of perfect competition market and rather relates to oligopolistic market, which is one of the types of imperfect competition market, according to the current classification of markets based on currently dominating structural approach. Another proof of negative impact of low market concentration on innovation (including the perfect competition market) lies in an inverted U-shaped relationship between the structure of the market and the degree of its participantsВ’ innovative activity. According to this dependence, there are medium-sized enterprises, but not small or large businesses, that are more innovative. These findings are also confirmed by other studies. Therefore, modern competition policy needs significant transformation by identifying the target market state, which will be the most effective. Obviously, this market state should ensure intensive development of innovations.

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DOI resolver: doi.org/10.5593/sgemsocial2018/1.4/S04.078

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