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Vertical Organization, Technology Flows and R&D Incentives: An Exploratory Analysis

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  • Dietmar Harhoff

Abstract

Despite its importance, the impact of vertical organization on innovation incentives has not been investigated in depth. This paper develops a number of testable hypotheses and then provides a first exploratory empirical analysis, using cross-sectional industry-level data. Two simple stylized facts emerge from the empirical results. First, once a fragmented buyer industry is dependent on a relatively concentrated supply sector, the industry’s own R&D intensity is reduced substantially. Second, vertical technology flows appear to act as substitutes for an industry's own R&D if the receiving industry's concentration is relatively low. Both results are largely consistent with a number of case studies and with theoretical arguments discussed in the paper. ZUSAMMENFASSUNG - (Vertikale Organisation, Technologieflüsse und FuE-Anreize - Eine explorative Studie) Der Einfluß der vertikalen Organisation von Industrien auf Innovationsanreize ist trotz der Bedeutung der Fragestellung noch nicht detailliert untersucht worden. Dieses Papier stellt eine Reihe von testbaren Hypothesen vor und präsentiert eine erste explorative empirische Analyse auf der Basis eines Querschnittsdatensatzes. Zwei empirische Regularitäten können nachgewiesen werden. Zum einen liegt die FuE-Intensität einer Industrie erheblich unter dem üblichen Durchschnitt, wenn die Konzentration der Industrie niedrig ist, aber eine Abhängigkeit von einer konzentrierten Zuliefererindustrie besteht. Zum zweiten scheinen vertikale Technologieflüsse als Substitute für die eigene FuE einer Industrie zu fungieren, sobald die Konzentration der Empfängerindustrie relativ niedrig ist. Beide Resultate sind prinzipiell konsistent mit weiterer Evidenz aus Fallstudien und mit den theoretisch hergeleiteten Hypothesen.

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Bibliographic Info

Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 98-02.

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Length: 31 pages
Date of creation: Apr 1998
Date of revision:
Publication status: Published in: D. C. Mueller/A. Haid/J. Weigand (eds.): Competition, Efficiency, and Welfare: Essays in Honor of Manfred Neumann , 1999. Boston, Dordrecht and London: Kluwer Academic, 1999, pp. 57-82.
Handle: RePEc:wzb:wzebiv:fsiv98-2

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Related research

Keywords: vertical structure; research and development; appropriability;

References

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  1. Dasgupta, Partha & Stiglitz, Joseph, 1980. "Industrial Structure and the Nature of Innovative Activity," Economic Journal, Royal Economic Society, vol. 90(358), pages 266-93, June.
  2. Harhoff, Dietmar, 1997. "Innovationsanreize in einem strukturellen Oligopolmodel," ZEW Discussion Papers 97-16, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1987. "Appropriating the Returns from Industrial Research and Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 783-832.
  4. Hausman, Jerry A., 1983. "Specification and estimation of simultaneous equation models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 7, pages 391-448 Elsevier.
  5. Scherer, F. M., 1983. "The propensity to patent," International Journal of Industrial Organization, Elsevier, vol. 1(1), pages 107-128, March.
  6. Demsetz, Harold, 1969. "Information and Efficiency: Another Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 1-22, April.
  7. Nelson, Richard R. & Winter, Sidney G., 1993. "In search of useful theory of innovation," Research Policy, Elsevier, vol. 22(2), pages 108-108, April.
  8. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-96, September.
  9. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
  10. Dietmar Harhoff, 1996. "Strategic Spillovers and Incentives for Research and Development," Management Science, INFORMS, vol. 42(6), pages 907-925, June.
  11. Bernstein, Jeffrey I. & Nadiri, M. Ishaq, 1988. "Research and Development and Intraindustry Spillovers: An Empirical Application of Dynamic Duality," Working Papers 88-06, C.V. Starr Center for Applied Economics, New York University.
  12. Bernstein, Jeffrey I, 1989. "The Structure of Canadian Inter-industry R&D Spillovers, and the Rates of Return to R&D," Journal of Industrial Economics, Wiley Blackwell, vol. 37(3), pages 315-28, March.
  13. Lichtenberg, Frank R, 1987. "The Effect of Government Funding on Private Industrial Research and Development: A Re-assessment," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 97-104, September.
  14. Richard Levin & Peter C. Reiss, 1984. "Tests of a Schumpeterian Model of R&D and Market Structure," NBER Chapters, in: R & D, Patents, and Productivity, pages 175-208 National Bureau of Economic Research, Inc.
  15. Pavitt, Keith, 1983. "Characteristics of innovative activities in British industry," Omega, Elsevier, vol. 11(2), pages 113-130.
  16. Farber, Stephen C, 1981. "Buyer Market Structure and R&D Effort: A Simultaneous Equations Model," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 336-45, August.
  17. Dietmar Harhoff & Frederic M. Scherer & Katrin Vopel, 1997. "Exploring the Tail of Patented Invention Value Distributions," CIG Working Papers FS IV 97-27, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  18. Bernstein, Jeffrey I & Nadiri, M Ishaq, 1988. "Interindustry R&D Spillovers, Rates of Return, and Production in High-Tech Industries," American Economic Review, American Economic Association, vol. 78(2), pages 429-34, May.
  19. Jeffrey I. Bernstein, 1988. "Costs of Production, Intra- and Interindustry R&D Spillovers: Canadian Evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 21(2), pages 324-47, May.
  20. Von Hippel, Eric, 1982. "Appropriability of innovation benefit as a predictor of the source of innovation," Research Policy, Elsevier, vol. 11(2), pages 95-115, April.
  21. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  22. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1988. "Appropriating the Returns from Industrial R&D," Cowles Foundation Discussion Papers 862, Cowles Foundation for Research in Economics, Yale University.
  23. Pakes, Ariel S, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," Econometrica, Econometric Society, vol. 54(4), pages 755-84, July.
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  25. Murray Brown & Alfred H. Conrad, 1967. "The Influence of Research and Education on CES Production Relations," NBER Chapters, in: The Theory and Empirical Analysis of Production, pages 341-394 National Bureau of Economic Research, Inc.
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Cited by:
  1. Alfred Haid & Markus Thomas Münter, 1999. "Neuere Entwicklungen in der industrieökonomischen Forschung und die aktuelle Berichterstattung über die technologische Leistungsfähigkeit Deutschlands," Discussion Papers of DIW Berlin 188, DIW Berlin, German Institute for Economic Research.

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