IDEAS home Printed from https://ideas.repec.org/p/bwu/schdps/sdp08004.html
   My bibliography  Save this paper

Why Powerful Buyers finance Suppliers’ R&D

Author

Listed:
  • Werner Bönte

    (Schumpeter School of Business and Economics, University of Wuppertal)

  • Lars Wiethaus

    (ESMT Competition Analysis)

Abstract

It is a common concern that pricing pressure by powerful buyers discourages suppliers' R&D investments. Employing a simple monopsonist - competitive upstream industry - framework, this paper qualifies this view in two respects. First, the monopsonist has an incentive to subsidize upstream R&D which yields more upstream R&D and higher profits in both industries than the monopsonist's commitment to higher prices. Secondly, in the presence of intra-industry R&D spillovers between upstream firms, the monopsonist has an even stronger incentive to finance upstream R&D. If the monopsonist finances more than fifty percent of suppliers R&D efforts, R&D investments in upstream industry will be higher than in the case of buyer competition.

Suggested Citation

  • Werner Bönte & Lars Wiethaus, 2008. "Why Powerful Buyers finance Suppliers’ R&D," Schumpeter Discussion Papers sdp08004, Universitätsbibliothek Wuppertal, University Library.
    • Handle: RePEc:bwu:schdps:sdp08004
    as

    Download full text from publisher

    File URL: https://elekpub.bib.uni-wuppertal.de/ubwhsmig/download/pdf/7339104?originalFilename=true
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Vertical Relationships; Monopsony; Buyer Power; R&D; Knowledge Spillovers;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bwu:schdps:sdp08004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Frank Hoffmann (email available below). General contact details of provider: http://elpub.bib.uni-wuppertal.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.