29 Pages Posted: 4 Jun 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.
Suggested Citation: 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
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