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Downstream Research Joint Venture with Upstream Market Power

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Author Info
Constantine Manasakis () (Department of Economics, University of Crete, Greece)
Emmanuel Petrakis () (Department of Economics, University of Crete, Greece)

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Abstract

In this paper, we examine how the structure of an imperfectly competitive input market affects final-good producers’ incentives to form a Research Joint Venture (RJV), in a differentiated duopoly where R&D investments exhibit spillovers. Although a RJV is always profitable, downstream firms’ incentives for R&D cooperation are non-monotone in the structure of the input market, with incentives being stronger under a monopolistic input supplier, whenever spillovers are low. In contrast to the hold-up argument, we also find that under non-cooperative R&D investments and weak free-riding, final-good producers invest more when facing a monopolistic input supplier, compared with investments under competing vertical chains. Integrated innovation and competition policies are also discussed.

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Publisher Info
Paper provided by University of Crete, Department of Economics in its series Working Papers with number 0513.

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Length: 25 pages
Date of creation: 00 Sep 2005
Date of revision:
Handle: RePEc:crt:wpaper:0513

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Related research
Keywords: Oligopoly; Process Innovations; Research Joint Ventures;

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Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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  1. Poyago-Theotoky, Joanna, 1995. "Equilibrium and Optimal Size of a Research Joint Venture in an Oligopoly with Spillovers," Journal of Industrial Economics, Blackwell Publishing, vol. 43(2), pages 209-26, June. [Downloadable!] (restricted)
  2. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December. [Downloadable!] (restricted)
  3. Belderbos, Rene & Carree, Martin & Diederen, Bert & Lokshin, Boris & Veugelers, Reinhilde, 2004. "Heterogeneity in R&D cooperation strategies," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1237-1263, November. [Downloadable!] (restricted)
    Other versions:
  4. Gamal Atallah, 2000. "Vertical R&D Spillovers, Cooperation, Market Structure, And Innovation," Industrial Organization 0004009, EconWPA. [Downloadable!]
    Other versions:
  5. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December. [Downloadable!] (restricted)
  6. Benfratello, Luigi & Sembenelli, Alessandro, 2002. "Research joint ventures and firm level performance," Research Policy, Elsevier, vol. 31(4), pages 493-507, May. [Downloadable!] (restricted)
  7. Roberto Hern·n & Pedro L. MarÌn & Georges Siotis, 2003. "An empirical evaluation of the determinants of Research Joint Venture Formation," Journal of Industrial Economics, Blackwell Publishing, vol. 51(1), pages 75-89, 03. [Downloadable!] (restricted)
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  8. Yannis Caloghirou & Stavros Ioannides & Nicholas S. Vonortas, 2003. "Research Joint Ventures," Journal of Economic Surveys, Blackwell Publishing, vol. 17(4), pages 541-570, 09. [Downloadable!] (restricted)
  9. Cassiman, Bruno & Veugelers, Reinhilde, 1999. "R&D Cooperation and Spillovers: Some Empirical Evidence," CEPR Discussion Papers 2330, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  10. Miyagiwa, Kaz & Ohno, Yuka, 2002. "Uncertainty, spillovers, and cooperative R&D," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 855-876, June. [Downloadable!] (restricted)
  11. Yi, Sang-Seung & Shin, Hyukseung, 2000. "Endogenous formation of research coalitions with spillovers," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 229-256, February. [Downloadable!] (restricted)
  12. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-20, December. [Downloadable!] (restricted)
  13. Cabral, Luis M. B., 2000. "R&D cooperation and product market competition," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1033-1047, October. [Downloadable!] (restricted)
  14. Amir, Rabah & Evstigneev, Igor & Wooders, John, 2003. "Noncooperative versus cooperative R&D with endogenous spillover rates," Games and Economic Behavior, Elsevier, vol. 42(2), pages 183-207, February. [Downloadable!] (restricted)
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  15. W. Salant, Stephen & Shaffer, Greg, 1998. "Optimal asymmetric strategies in research joint ventures," International Journal of Industrial Organization, Elsevier, vol. 16(2), pages 195-208, March. [Downloadable!] (restricted)
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  16. Lambertini, Luca & Poddar, Sougata & Sasaki, Dan, 2002. "Research joint ventures, product differentiation, and price collusion," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 829-854, June. [Downloadable!] (restricted)
  17. Masao Nakamura & Yannis Caloghirou & George Hondroyiannis & Nicholas S. Vonortas, 2003. "The performance of research partnerships," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(2-3), pages 85-99. [Downloadable!]
  18. Katsoulacos, Yannis & Ulph, David, 1998. "Endogenous Spillovers and the Performance of Research Joint Ventures," Journal of Industrial Economics, Blackwell Publishing, vol. 46(3), pages 333-57, September. [Downloadable!] (restricted)
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