Testing the relationship between market concentration and innovation from competition to creative destruction in G-20 countries

The aim of the study is to convey the views on how the presence or absence of competition in the market affects innovation, and then to test the suitability of the views put forward within the scope of the data. According to Adam Smith, competition is good for markets and trade, whereas privileges such as monopoly are the great enemy of good management and undermine innovation. On the other hand, Schumpeter puts the entrepreneur and innovator at the center of capitalism and describes the innovator as the one who constantly renews, changes, or, more accurately, puts innovation as the necessary driving force. He in this context is not hostile to the large or dominant firm, or market concentration; on the contrary he sees all these situations as a requisite for innovation. Within this context the effects of R&D expenditure, GDP per capita, trade openness ratio, foreign direct investment ratio, Herfindahl-Hirschman index and competition level index in the market on the number of patent applications of the G-20 countries for the years 2009- 2019 were tested by panel data analysis, and it was seen that the increase in the level of competition in the market led to a positive change (increase) in innovation, as Smithian views assert.