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Downstream Research Joint Venture with Upstream Market Power

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  • Constantine Manasakis

    ()
    (Department of Political Science, University of Crete, Düsseldorf Institute for Competition Economics (DICE), Heinrich-Heine Universität Düsseldorf; corresponding author)

  • Emmanuel Petrakis

    ()
    (?Department of Economics, University of Crete, University Campus at Gallos, Rethymnon 74100, Greece;)

  • Vasileios Zikos

    ()
    (?Research Institute for Policy Evaluation and Design, University of the Thai Chamber of Commerce, 126/1 Vibhavadee-Rangsit Road, Dindaeng, Bangkok, 10400, Thailand;)

Abstract

In a vertically related industry, we examine the downstream firms' incentives to invest in cost-reducing Research and Development (R&D), and to form a Research Joint Venture (RJV), under two alternative structures of input supply: exclusive vertical relations and a single supplier. In contrast to the “hold-up” argument, in which downstream firms invest non-cooperatively and spillovers are low, R&D investments are higher under a single supplier than under competing vertical chains. Downstream firms' incentives to form a RJV are also stronger in the former case than they are in the latter. We identify conditions under which an RJV is beneficial for society. Integrated innovation and competition policies are also discussed.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 80 (2014)
Issue (Month): 3 (January)
Pages: 782-802

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Handle: RePEc:sej:ancoec:v:80:3:y:2014:p:782-802

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  1. Cassiman, Bruno & Veugelers, Reinhilde, 1999. "R&D Cooperation and Spillovers: Some Empirical Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2330, C.E.P.R. Discussion Papers.
  2. Hernán, Roberto & Marín Uribe, Pedro Luis & Siotis, Georges, 2000. "An Empirical Evaluation Of The Determinants Of Research Joint Venture Formation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2442, C.E.P.R. Discussion Papers.
  3. Gamal Atallah, 2000. "Vertical R&D Spillovers, Cooperation, Market Structure, and Innovation," CIRANO Working Papers, CIRANO 2000s-54, CIRANO.
  4. AMIR, Rabah & EVSTIGNEEV, Igor & WOODERS, John, 2001. "Noncooperative versus cooperative R&D with endogenous spillover rates," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2001050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Miyagiwa, Kaz & Ohno, Yuka, 2002. "Uncertainty, spillovers, and cooperative R&D," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 20(6), pages 855-876, June.
  6. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, American Economic Association, vol. 82(5), pages 1307-20, December.
  7. Belderbos, Rene & Carree, Martin & Diederen, Bert & Lokshin, Boris & Veugelers, Reinhilde, 2004. "Heterogeneity in R&D cooperation strategies," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 22(8-9), pages 1237-1263, November.
  8. Salant, S.W. & Shaffer, G., 1997. "Optimal Asymmetric Strategies in Research Joint Ventures," Papers, Michigan - Center for Research on Economic & Social Theory 97-06, Michigan - Center for Research on Economic & Social Theory.
  9. Katsoulacos, Yannis & Ulph, David, 1998. "Endogenous Spillovers and the Performance of Research Joint Ventures," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 46(3), pages 333-57, September.
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  12. Benfratello, Luigi & Sembenelli, Alessandro, 2002. "Research joint ventures and firm level performance," Research Policy, Elsevier, Elsevier, vol. 31(4), pages 493-507, May.
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  14. Poyago-Theotoky, Joanna, 1995. "Equilibrium and Optimal Size of a Research Joint Venture in an Oligopoly with Spillovers," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 43(2), pages 209-26, June.
  15. Ziss, Steffen, 1994. "Strategic R&D with Spillovers, Collusion and Welfare," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 42(4), pages 375-93, December.
  16. Yannis Caloghirou & Stavros Ioannides & Nicholas S. Vonortas, 2003. "Research Joint Ventures," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 17(4), pages 541-570, 09.
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  18. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, American Economic Association, vol. 82(5), pages 1293-306, December.
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