the impact of innovation on the market share instability, case study of the iranian food and drinking industries (lstr approach)

the main objective of this paper is to investigate the effect of innovation on the market share instability in the iranian food and drinking industry with a 4- digit code. according to schumpeter that states one of the most important hypothesis in this area, says there are a non-linear and an inverse of u-shaped relationship between the two variables of innovation and market share instability. to test the schumpeter’s hypothesis for the iranian food and drinking industries over the period of 1995:1-2009:4, we used the lstr approach. the results show that there is a non-linear relationship between innovation and market share instability (or competitive dynamics) in the food and drinking industries in iran. the iranian government should inform the firms, producing the food and drinking products, that research and development expenditures increase their market shares and thus raise their profits. furthermore, financial incentives (such as tax exemptions or compensation income of enterprises manufacturing food and drinking in iran, increased funding for industrial research, subsidies for startup or equipment r & d units of firms in the food and drinking industries, the exemption of customs duty on capital equipment of the research units and so on) provide circumstances for the firms to develop their r & d activities. jel classification: c22:l10:m37