Product Market Competition and the Relocation of Economic Activity

Download or read book Product Market Competition and the Relocation of Economic Activity written by Chen Chen and published by . This book was released on 2020 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that increasing competition changes the location of economic activity and, in turn, affects supply chain relationships. Using establishment-level data, we find that when upstream product markets become more competitive, suppliers are more likely to relocate their establishments closer to customers. Following the supplier's relocation, its sales to the customer increase, its relationship with the customer is less likely to be terminated, and its innovation is more aligned with the customer's innovation. However, the improved relationship, by causing the supplier to engage more in innovation dedicated to the customer, adversely affects creative innovation, which is known to drive growth.