Innovation in Vertically Related Markets
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)
The Journal of Industrial Economics, Vol. 58, Issue 2, pp. 373-401, June 2010
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.
Number of Pages in PDF File: 29
Date posted: June 4, 2010