Buyer power and suppliers' incentives to innovate
AbstractBuyer power is widely considered to decrease innovation incentives of suppliers. However, there is little empirical evidence for this statement. Our paper analyses how buyer power influences innovation incentives of upstream firms while taking into account the type of competition in the downstream market, namely price and technology. We explore this relationship empirically for a unique dataset containing 1,129 observations of German firms from manufacturing and service sectors including information on the economic dependency of firms from their buyers. Using a generalised Tobit model, we find a negative effect of buyer power on a supplier's likelihood to start R&D activities. This negative effect is mitigated if the supplier faces powerful buyers operating under strong price competition. There is also weak evidence for a negative effect of buyer power on suppliers' R&D intensity if the powerful buyer operates under strong technology competition. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 12-058.
Date of creation: 2012
Date of revision:
Innovation; Buyer Power;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- 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-2012-11-24 (All new papers)
- NEP-COM-2012-11-24 (Industrial Competition)
- NEP-CSE-2012-11-24 (Economics of Strategic Management)
- NEP-IND-2012-11-24 (Industrial Organization)
- NEP-INO-2012-11-24 (Innovation)
- NEP-SBM-2012-11-24 (Small Business Management)
- NEP-TID-2012-11-24 (Technology & Industrial Dynamics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Heckman, James J, 1979.
"Sample Selection Bias as a Specification Error,"
Econometric Society, vol. 47(1), pages 153-61, January.
- Bruno Crepon & Emmanuel Duguet & Jacques Mairesse, 1998.
"Research, Innovation, and Productivity: An Econometric Analysis at the Firm Level,"
NBER Working Papers
6696, National Bureau of Economic Research, Inc.
- Bruno Crepon & Emmanuel Duguet & Jacques Mairessec, 1998. "Research, Innovation And Productivi[Ty: An Econometric Analysis At The Firm Level," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 7(2), pages 115-158.
- Bruno Crépon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation and Productivity : An Econometric Analysis at the Firm Level," Working Papers 98-33, Centre de Recherche en Economie et Statistique.
- Stefanadis, Christodoulos, 1997. "Downstream Vertical Foreclosure and Upstream Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 445-56, December.
- Inderst, Roman & Wey, Christian, 2007.
"Buyer power and supplier incentives,"
European Economic Review,
Elsevier, vol. 51(3), pages 647-667, April.
- Roman Inderst & Christian Wey, 2005. "Buyer Power and Supplier Incentives," Discussion Papers of DIW Berlin 464, DIW Berlin, German Institute for Economic Research.
- Roman Inderst & Christian Wey, 2003. "Buyer Power and Supplier Incentives," CIG Working Papers SP II 2003-05, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Inderst, Roman & Wey, Christian, 2002. "Buyer Power and Supplier Incentives," CEPR Discussion Papers 3547, C.E.P.R. Discussion Papers.
- Snyder, Christopher M., 1998. "Why do larger buyers pay lower prices? Intense supplier competition," Economics Letters, Elsevier, vol. 58(2), pages 205-209, February.
- Teece, David J., 1986.
"Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy,"
Elsevier, vol. 15(6), pages 285-305, December.
- Teece, David J., 1993. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 22(2), pages 112-113, April.
- Alvin K. Klevorick & Richard C. Levin & Richard R. Nelson & Sidney G. Winter, 1993.
"On the Sources and Significance of Interindustry Differences in Technological Opportunities,"
Cowles Foundation Discussion Papers
1052, Cowles Foundation for Research in Economics, Yale University.
- Klevorick, Alvin K. & Levin, Richard C. & Nelson, Richard R. & Winter, Sidney G., 1995. "On the sources and significance of interindustry differences in technological opportunities," Research Policy, Elsevier, vol. 24(2), pages 185-205, March.
- Crepon, B. & Duguet, E. & Mairesse, J., 1998. "Research Investment, Innovation and Productivity: An Econometric Analysis at the Firm Level," Papiers d'Economie MathÃÂ©matique et Applications 98.15, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- Roman Inderst & Christian Wey, 2011.
"Countervailing Power And Dynamic Efficiency,"
Journal of the European Economic Association,
European Economic Association, vol. 9(4), pages 702-720, 08.
- Roman Inderst & Tommaso Valletti, 2006. "Market Analysis in the Presence of Indirect Constraints and Captive Sales," CEIS Research Paper 74, Tor Vergata University, CEIS.
- Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June.
- repec:fth:inseep:9833 is not listed on IDEAS
- 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.
- Inderst, Roman & Shaffer, Greg, 2004.
"Retail Mergers: Buyer Power and Product Variety,"
CEPR Discussion Papers
4236, C.E.P.R. Discussion Papers.
- Hagedoorn, John & Cloodt, Myriam, 2003. "Measuring innovative performance: is there an advantage in using multiple indicators?," Research Policy, Elsevier, vol. 32(8), pages 1365-1379, September.
- Scherer, F M, 1982. "Demand-Pull and Technological Invention: Schmookler Revisited," Journal of Industrial Economics, Wiley Blackwell, vol. 30(3), pages 225-37, March.
- Utterback, James M & Abernathy, William J, 1975. "A dynamic model of process and product innovation," Omega, Elsevier, vol. 3(6), pages 639-656, December.
- 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.
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, September.
- Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
- Jürgen Peters, 2000. "Buyer Market Power and Innovative Activities," Review of Industrial Organization, Springer, vol. 16(1), pages 13-38, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.