Asymmetric relationship between competition and innovation: Evidence from banks in the Eurozone

Tee, Kenny, Syriopoulos, Konstantinos, Rubbaniy, Ghulame, and Salim, Amna (2025) Asymmetric relationship between competition and innovation: Evidence from banks in the Eurozone. Journal of Economic Asymmetries, 32. e00434.

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DOI: 10.1016/j.jeca.2025.e00434

View at Publisher Website: https://doi.org/10.1016/j.jeca.2025.e004...

Abstract

This study examines the asymmetric relationship between competition and innovation in Eurozone banking, using data from the original 11 Economic and Monetary Union member states. Employing the technology gap ratio for innovation and the Lerner index and Boone indicator for competition, we find an inverted-U pattern: innovation initially rises with competition but declines beyond a threshold. Granger causality tests confirm bidirectional causality on the upward slope but none on the downward, highlighting nonlinearity. These findings suggest that moderate competition fosters innovation, while excessive rivalry stifles it. Policymakers should balance competition to maximize innovation without undermining long-term technological progress.


Item ID:	88475
Item Type:	Article (Research - C1)
ISSN:	1703-4949
Keywords:	Bank, Boone indicator, Competition, Eurozone, Granger causality, Innovation, Lerner index, Stochastic frontier analysis, Technology gap ratio
Copyright Information:	© 2025 Elsevier B.V. All rights are reserved, including those for text and data mining, AI training, and similar technologies.
Date Deposited:	28 Apr 2026 07:40
FoR Codes:	38 ECONOMICS > 3801 Applied economics > 380102 Behavioural economics @ 100%
SEO Codes:	15 ECONOMIC FRAMEWORK > 1503 Management and productivity > 150304 Productivity (excl. public sector) @ 100%
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