Vertical integration and product innovation
AbstractWe study vertical integration and product innovation (in the form of horizontal product differentiation) as interdependent strategic choices of vertically related firms. We consider product innovation in the downstream market as a strategic decision of innovative firms facing a threat of vertical integration and market foreclosure by an upstream monopolist. Our main finding is that, although product differentiation allows to soften product market competition and to avoid market foreclosure, the downstream market may prefer less product differentiation to deter vertical integration. Therefore, less product innovation can be a possible social cost of a lenient antitrust policy.
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Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 07/12.
Date of creation: Oct 2007
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Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-10-13 (All new papers)
- NEP-BEC-2007-10-13 (Business Economics)
- NEP-COM-2007-10-13 (Industrial Competition)
- NEP-INO-2007-10-13 (Innovation)
- NEP-MIC-2007-10-13 (Microeconomics)
- NEP-TID-2007-10-13 (Technology & Industrial Dynamics)
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- Bouguezzi, Fehmi & EL ELJ, Moez, 2009.
"Vertical Integration and Patent Licensing in Upstream and Downstream Markets,"
22212, University Library of Munich, Germany.
- Fehmi Bouguezzi & Moez El Elj, 2010. "Vertical Integration and Patent Licensing in Upstream and Downstream Markets," Journal of Advanced Research in Management, ASERS Publishing, vol. 0(1), pages 4-17, June.
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