Title: Competition, Capability, and Process Innovation

Speaker: Yue Maggie Zhou (Michigan Ross School of Business)

Time: 15:00 (Friday), June 5, 2026

Venue: Room1008, Mingde Business Building

Language: Chinese/English

ABSTRACT：

We examine how competition affects process innovation in competitive markets and how firm capability moderates that relationship. Existing research offers competing predictions: competition may reduce innovation by compressing rents, but it may also stimulate innovation by increasing firms’ risk of failure without innovation. We build a formal model in which firms choose innovation by trading off short-term profitability against survival. The model predicts competition reduces innovation and yields sufficient conditions under which firm capability weakens this negative effect. We further examine these sufficient conditions across industries using Compustat data. Our study contributes to research on competition and innovation by explaining why competition may discourage innovation in thin-margin markets and why this effect varies systematically with firm capability.