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INNOVATION IN VERTICALLY RELATED MARKETS -super-

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  • YONGMIN CHEN
  • DAVID E. M. SAPPINGTON

Abstract

We examine the impact of vertical industry structure on upstream process innovation. We find that vertical integration (VI) generally enhances innovation under downstream Cournot competition, but can diminish innovation under downstream Bertrand competition. We also find that under Bertrand competition, VI can increase innovation when the direct incentives for innovation are limited, but can reduce innovation when the direct incentives are pronounced. Copyright 2010 The Authors. Journal compilation 2010 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.

Suggested Citation

  • Yongmin Chen & David E. M. Sappington, 2010. "INNOVATION IN VERTICALLY RELATED MARKETS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 58(2), pages 373-401, June.
  • Handle: RePEc:bla:jindec:v:58:y:2010:i:2:p:373-401
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    References listed on IDEAS

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    1. Richard J. Gilbert & Michael H. Riordan, 2007. "PRODUCT IMPROVEMENT AND TECHNOLOGICAL TYING IN A WINNER-TAKE-ALL MARKET -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 113-139, March.
    2. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 701-728.
    3. Farrell, Joseph & Katz, Michael L, 2000. "Innovation, Rent Extraction, and Integration in Systems Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 413-432, December.
    4. Buehler, Stefan & Schmutzler, Armin & Benz, Men-Andri, 2004. "Infrastructure quality in deregulated industries: is there an underinvestment problem?," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 253-267, February.
    5. Joseph J. Spengler, 1950. "Vertical Integration and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 58, pages 347-347.
    6. Chen, Yongmin, 2001. "On Vertical Mergers and Their Competitive Effects," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 667-685, Winter.
    7. Stefan Buehler, 2005. "The Promise and Pitfalls of Restructuring Network Industries," German Economic Review, Verein für Socialpolitik, vol. 6(2), pages 205-228, May.
    8. Jay Pil Choi & Gwanghoon Lee & Christodoulos Stefanadis, 2003. "The Effects of Integration on R&D Incentives in Systems Markets," Netnomics, Springer, vol. 5(1), pages 21-32, May.
    9. Jay Pil Choi & Sang-Seung Yi, 2000. "Vertical Foreclosure with the Choice of Input Specifications," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 717-743, Winter.
    10. Stefan Buehler & Dennis Gärtner & Daniel Halbheer, 2006. "Deregulating Network Industries: Dealing with Price-quality Tradeoffs," Journal of Regulatory Economics, Springer, vol. 30(1), pages 99-115, July.
    11. Xavier Vives, 2008. "INNOVATION AND COMPETITIVE PRESSURE -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    12. Buehler, Stefan & Schmutzler, Armin, 2008. "Intimidating competitors -- Endogenous vertical integration and downstream investment in successive oligopoly," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 247-265, January.
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    1. repec:eee:indorg:v:55:y:2017:i:c:p:25-57 is not listed on IDEAS
    2. Brito Duarte & Pereira Pedro & Vareda João, 2012. "Does Vertical Separation Necessarily Reduce Quality Discrimination and Increase Welfare?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-44, November.
    3. Liu, Xingyi, 2016. "Vertical integration and innovation," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 88-120.
    4. Zhang, Tianle, 2012. "Patenting in the shadow of independent discoveries by rivals," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 41-49.
    5. Andreas Haller & Christian Jaag & Urs Trinkner, 2013. "Termination charges in the international parcel market," Chapters,in: Reforming the Postal Sector in the Face of Electronic Competition, chapter 19, pages 277-293 Edward Elgar Publishing.
    6. Chen Yutian & Sen Debapriya, 2012. "Outsourcing and Downstream R&D under Economies of Scale," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-33, September.

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