Abstract

http://ssrn.com/abstract=2141963
 


 



Buyer Power and Suppliers' Incentives to Innovate


Christian Koehler


Centre for European Economic Research (ZEW)

Christian Rammer


Centre for European Economic Research (ZEW) - Industrial Economics and International Management Research

2012

ZEW - Centre for European Economic Research Discussion Paper No. 12-058

Abstract:     
Buyer power is widely considered to decrease innovation incentives of suppliers. However, there is little empirical evidence for this statement. Our paper analyses how buyer power influences innovation incentives of upstream firms while taking into account the type of competition in the downstream market, namely price and technology. We explore this relationship empirically for a unique dataset containing 1,129 observations of German firms from manufacturing and service sectors including information on the economic dependency of firms from their buyers. Using a generalised Tobit model, we find a negative effect of buyer power on a supplier’s likelihood to start R&D activities. This negative effect is mitigated if the supplier faces powerful buyers operating under strong price competition. There is also weak evidence for a negative effect of buyer power on suppliers’ R&D intensity if the powerful buyer operates under strong technology competition.

Number of Pages in PDF File: 30

Keywords: Innovation, Buyer Power

JEL Classification: L11, O31

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Date posted: September 5, 2012  

Suggested Citation

Koehler, Christian and Rammer, Christian, Buyer Power and Suppliers' Incentives to Innovate (2012). ZEW - Centre for European Economic Research Discussion Paper No. 12-058. Available at SSRN: http://ssrn.com/abstract=2141963 or http://dx.doi.org/10.2139/ssrn.2141963

Contact Information

Christian Koehler (Contact Author)
Centre for European Economic Research (ZEW) ( email )
P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany
Christian Rammer
Centre for European Economic Research (ZEW) - Industrial Economics and International Management Research ( email )
P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany
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