Economics for Hawaii Teachers 2025 – 400 Free Practice Questions to Pass the Exam

Firms innovate to gain a competitive edge because competition in the marketplace drives businesses to differentiate themselves from their rivals. When multiple companies seek to attract customers, they are incentivized to develop new products, improve existing ones, and enhance their services. This pursuit of innovation can lead to technological advancements and better solutions for consumers, ultimately fostering a dynamic market environment.

In competitive markets, the pressure to maintain or increase market share often results in continual improvements and creative breakthroughs. Companies recognize that failing to innovate might result in losing customers to competitors who offer newer and superior products. Hence, the relationship between competition and innovation is vital, as it encourages firms to invest in research and development, leading to a faster pace of innovation and improvement across industries.