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Innovation In Vertically Related Markets

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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.

Suggested Citation

  • Yongmin Chen & David E. M. Sappington, 2010. "Innovation In Vertically Related Markets," 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
    DOI: 10.1111/j.1467-6451.2010.00414.x
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    References listed on IDEAS

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    Cited by:

    1. Zanchettin, Piercarlo & Mukherjee, Arijit, 2017. "Vertical integration and product differentiation," International Journal of Industrial Organization, Elsevier, vol. 55(C), pages 25-57.
    2. Fiocco, Raffaele & Guo, Dongyu, 2020. "Regulatory risk, vertical integration, and upstream investment," European Economic Review, Elsevier, vol. 128(C).
    3. Inés Macho-Stadler & Noriaki Matsushima & Ryusuke Shinohara, 2019. "Organizational structure and technological investment," ISER Discussion Paper 1069r, Institute of Social and Economic Research, Osaka University, revised Apr 2020.
    4. 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.
    5. Inés Macho-Stadler & Noriaki Matsushima & Ryusuke Shinohara, 2019. "Organizational Structure and Technological Investment," ISER Discussion Paper 1069, Institute of Social and Economic Research, Osaka University.
    6. Benoit Voudon, 2019. "Vertical Integration in the presence of a Cost-Reducing Technology," Trinity Economics Papers tep0919, Trinity College Dublin, Department of Economics.
    7. Liu, Xingyi, 2016. "Vertical integration and innovation," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 88-120.
    8. Zhang, Tianle, 2012. "Patenting in the shadow of independent discoveries by rivals," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 41-49.
    9. Inés Macho‐Stadler & Noriaki Matsushima & Ryusuke Shinohara, 2021. "Organizational Structure and Technological Investment," Journal of Industrial Economics, Wiley Blackwell, vol. 69(4), pages 785-816, December.
    10. Akio Kawasaki & Tomomichi Mizuno & Kazuhiro Takauchi, 2023. "Downstream new product development and upstream process innovation," Journal of Economics, Springer, vol. 140(3), pages 209-231, December.
    11. Andreas Haller & Christian Jaag & Urs Trinkner, 2013. "Termination charges in the international parcel market," Chapters, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Reforming the Postal Sector in the Face of Electronic Competition, chapter 19, pages 277-293, Edward Elgar Publishing.
    12. Raffaele Fiocco & Dongyu Guo, 2015. "Mergers between regulated firms with unknown efficiency gains," Review of Economic Design, Springer;Society for Economic Design, vol. 19(4), pages 299-326, December.
    13. Walker Hanlon & Taylor Jaworski, 2022. "Spillover Effects of Intellectual Property Protection in the Interwar Aircraft Industry," The Economic Journal, Royal Economic Society, vol. 132(645), pages 1824-1851.
    14. Chrysovalantou Miliou & Emmanuel Petrakis, 2015. "Vertical Integration, Knowledge Disclosure and Decreasing Rival's Cost," Working Papers 1507, University of Crete, Department of Economics.
    15. Benoit Voudon, 2019. "Technology Adoption under Asymmetric Market Structure," Trinity Economics Papers tep0819, Trinity College Dublin, Department of Economics.
    16. 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.
    17. Ping Lin & Tianle Zhang & Wen Zhou, 2020. "Vertical integration and disruptive cross‐market R&D," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(1), pages 51-73, January.
    18. Alain-Désiré Nimubona & Hassan Benchekroun, 2014. "Environmental R&D in the Presence of an Eco-Industry," Working Papers 1406, University of Waterloo, Department of Economics, revised Sep 2014.
    19. Michael L. Polemis & Markos Tselekounis, 2022. "Upstream regulation and non-separable innovation," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(2), pages 301-312, June.

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