Organizational Structure and Technological Investment

ISER DP No. 1069

53 Pages Posted: 5 Dec 2019 Last revised: 14 Dec 2020

See all articles by Ines Macho-Stadler

Ines Macho-Stadler

Universidad Autonoma de Barcelona; Barcelona Graduate School of Economics (Barcelona GSE); CESifo (Center for Economic Studies and Ifo Institute)

Noriaki Matsushima

Osaka University - Institute of Social and Economic Research (ISER)

Ryusuke Shinohara

Department of Economics, Hosei University

Date Written: December 7, 2020

Abstract

We analyze firms' decisions on their vertical organization, taking into account the characteristics of both the final good competition and the R&D process. We consider two vertical chains, where upstream sectors invest in R&D. Such investment determines the production costs of the downstream sector and has spillovers on the production and the investment costs of the rival. In a general setting, we show that the equilibrium organizational structure depends on whether the situation considered belongs to one of four possible cases. We study how final good market competition, R&D spillover, and R&D incentives interact to determine the equilibrium vertical structure.

Keywords: R&D, Vertical separation, Market structure, Spillover

JEL Classification: L22, L13, O32, C72

Suggested Citation

Macho-Stadler, Ines and Matsushima, Noriaki and Shinohara, Ryusuke, Organizational Structure and Technological Investment (December 7, 2020). ISER DP No. 1069, Available at SSRN: https://ssrn.com/abstract=3489662 or http://dx.doi.org/10.2139/ssrn.3489662

Ines Macho-Stadler

Universidad Autonoma de Barcelona ( email )

Departamento de Economia e Historia Economica
08193 Barcelona
Spain

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Noriaki Matsushima (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

Ryusuke Shinohara

Department of Economics, Hosei University ( email )

4342
Aihara-machi
Machida, Tokyo 194-0298
Japan
+81-42-783-2534 (Phone)

HOME PAGE: http://ryusukeshinohara.ehoh.net/

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