Innovation in Vertically Related Markets

29 Pages Posted: 4 Jun 2010  

Yongmin Chen

University of Colorado at Boulder - Department of Economics

David E.M. Sappington

University of Florida - Warrington College of Business Administration - Department of Economics; National Bureau of Economic Research (NBER)

Abstract

We examine the impact of vertical industry structure on upstream process innovation. We find that vertical integration (VI) generally enhances innovation under downstream Cournot competition, but can diminish innovation under downstream Bertrand competition. We also find that under Bertrand competition, VI can increase innovation when the direct incentives for innovation are limited, but can reduce innovation when the direct incentives are pronounced.

Suggested Citation

Chen, Yongmin and Sappington, David E.M., Innovation in Vertically Related Markets. The Journal of Industrial Economics, Vol. 58, Issue 2, pp. 373-401, June 2010. Available at SSRN: https://ssrn.com/abstract=1615800 or http://dx.doi.org/10.1111/j.1467-6451.2010.00414.x

Yongmin Chen

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309-0256
United States
303-492-8736 (Phone)
303-492-8960 (Fax)

David E.M. Sappington

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Florida - Warrington College of Business Administration - Department of Economics ( email )

224 Matherly Hall
Gainesville, FL 32611-7140
United States
352-392-3904 (Phone)
352-336-1420 (Fax)

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