IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Vertical R&D Spillovers, Cooperation, Market Structure, and Innovation

Author Info

Listed author(s):
  • Gamal Atallah

Abstract

This paper studies vertical R&D spillovers between upstream and downstream firms. The model incorporates two vertically related industries, with horizontal spillovers within each industry and vertical spillovers between the two industries. Four types of R&D cooperation are studied: no cooperation, horizontal cooperation, vertical cooperation, and simultaneous horizontal and vertical cooperation. Vertical spillovers always increase R&D and welfare, while horizontal spillovers may increase or decrease them. The comparison of cooperative settings in terms of R&D shows that no setting uniformly dominates the others. Which type of cooperation yields more R&D depends on horizontal and vertical spillovers, and market structure. The ranking of cooperative structures hinges on the signs and magnitudes of three "competitive externalities" (vertical, horizontal, and diagonal) which capture the effect of the R&D of a firm on the profits of other firms. One of the basic results of the strategic investment literature is that cooperation between competitors decreases R&D when horizontal spillovers are low; the model shows that this result does not necessarily hold when vertical spillovers are sufficiently high, and/or when horizontal cooperation is combined with vertical cooperation.

Download Info

If 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.

File URL: http://www.tandfonline.com/doi/abs/10.1080/10438590210903
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 11 (2002)
Issue (Month): 3 ()
Pages: 179-209

as
in new window

Handle: RePEc:taf:ecinnt:v:11:y:2002:i:3:p:179-209
DOI: 10.1080/10438590210903
Contact details of provider: Web page: http://www.tandfonline.com/GEIN20

Order Information: Web: http://www.tandfonline.com/pricing/journal/GEIN20

Keywords: Vertical R&D Spillovers; Market Structure; Innovation; Vertical R&D Cooperation; R&D Policy;

Other versions of this item:

Find related papers by JEL classification:
  • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
  • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

References listed on IDEAS
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.:

as
in new window


  1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-1137, December.
  2. Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-662, September.
  3. David J. Teece, 2003. "Competition, Cooperation, and Innovation Organizational Arrangements for Regimes of Rapid Technological Progress," World Scientific Book Chapters,in: Essays In Technology Management And Policy Selected Papers of David J Teece, chapter 16, pages 447-474 World Scientific Publishing Co. Pte. Ltd..
  4. Hagedoorn, John & Link, Albert N. & Vonortas, Nicholas S., 2000. "Research partnerships1," Research Policy, Elsevier, vol. 29(4-5), pages 567-586, April.
  5. J. M. Alston & G. M. Scobie, 1983. "Distribution of Research Gains in Multistage Production Systems: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(2), pages 353-356.
  6. VanderWerf, Pieter A., 1992. "Explaining downstream innovation by commodity suppliers with expected innovation benefit," Research Policy, Elsevier, vol. 21(4), pages 315-333, August.
  7. Bruno Cassiman & Reinhilde Veugelers, 1998. "R&D cooperation and spillovers: Some empirical evidence," Economics Working Papers 328, Department of Economics and Business, Universitat Pompeu Fabra.
  8. Delbono, Flavio & Denicolo, Vincenzo, 1990. "R & D investment in a symmetric and homogeneous oligopol : Bertrand vs Cournot," International Journal of Industrial Organization, Elsevier, vol. 8(2), pages 297-313, June.
  9. Kamien, Morton I & Zang, Israel, 1993. "Competing Research Joint Ventures," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(1), pages 23-40, Spring.
  10. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
  11. W. Salant, Stephen & Shaffer, Greg, 1998. "Optimal asymmetric strategies in research joint ventures," International Journal of Industrial Organization, Elsevier, vol. 16(2), pages 195-208, March.
  12. Poyago-Theotoky, Joanna, 1995. "Equilibrium and Optimal Size of a Research Joint Venture in an Oligopoly with Spillovers," Journal of Industrial Economics, Wiley Blackwell, vol. 43(2), pages 209-226, June.
  13. Curtis Eaton & Mukesh Eswaran, 1997. "Technology-Traditing Coalitions in Supergames," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 135-149, Spring.
  14. Aghion, P. & Tirole, J., 1993. "On the Management of Innovation," Working papers 93-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters,in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  16. 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 324-347, May.
  17. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-1320, December.
  18. Dasgupta, Partha & Stiglitz, Joseph, 1980. "Industrial Structure and the Nature of Innovative Activity," Economic Journal, Royal Economic Society, vol. 90(358), pages 266-293, June.
  19. Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
  20. Harhoff, Dietmar, 1991. "R&D incentives and spillovers in a two-industry model," ZEW Discussion Papers 91-06, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  21. Young, Allan Richard, 1991. "Vertical Structure and Nash Equilibrium: A Note," Journal of Industrial Economics, Wiley Blackwell, vol. 39(6), pages 717-722, December.
  22. Nadiri, M.I., 1993. "Innovations and Technological Spillovers," Working Papers 93-31, C.V. Starr Center for Applied Economics, New York University.
  23. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-366, May.
  24. J. W. Freebairn & J. S. Davis & G. W. Edwards, 1983. "Distribution of Research Gains in Multistage Production Systems: Reply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(2), pages 357-359.
  25. Rafael Moner-Colonques & Jose Jorge Sempere-Monerris, 2000. "Cooperation In R&D With Spillovers And Delegation Of Sales," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 9(5), pages 401-420.
  26. Wolff, Edward N. & Ishaq Nadiri, M., 1993. "Spillover effects, linkage structure, and research and development," Structural Change and Economic Dynamics, Elsevier, vol. 4(2), pages 315-331, December.
  27. Goto, Akira & Suzuki, Kazuyuki, 1989. "R&D Capital, Rate of Return on R&D Investment and Spillover of R&D in Japanese Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 555-564, November.
  28. Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 217-223, December.
  29. J. W. Freebairn & J. S. Davis & G. W. Edwards, 1982. "Distribution of Research Gains in Multistage Production Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(1), pages 39-46.
  30. Kim B. Clark & W. Bruce Chew & Takahiro Fujimoto, 1987. "Product Development in the World Auto Industry," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 729-782.
  31. Irmen, Andreas, 1997. "Mark-up pricing and bilateral monopoly," Economics Letters, Elsevier, vol. 54(2), pages 179-184, February.
  32. Poyago-Theotoky, Joanna, 1996. "R&D Competition with Asymmetric Firms," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(3), pages 334-342, August.
  33. M. Ishaq Nadiri, 1993. "Innovations and Technological Spillovers," NBER Working Papers 4423, National Bureau of Economic Research, Inc.
  34. Chongwoo Choe, 1998. "Two Comments on the Industrial Organisation of Vertically Related Markets," Working Papers 1998.03, School of Economics, La Trobe University.
  35. Boivin, Caroline & Vencatachellum, Désiré, 1998. "Externalités et coopération en recherche et développement : une reconceptualisation," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(4), pages 633-649, décembre.
  36. Greenhut, M L & Ohta, H, 1979. "Vertical Integration of Successive Oligopolists," American Economic Review, American Economic Association, vol. 69(1), pages 137-141, March.
  37. Bester, Helmut & Petrakis, Emmanuel, 1993. "The incentives for cost reduction in a differentiated industry," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 519-534.
  38. Baumol, William J., 1997. "Pareto Optimal Sizes of Innovation Spillovers," Working Papers 97-42, C.V. Starr Center for Applied Economics, New York University.
  39. 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 429-434, May.
  40. Kamien,Morton I. & Schwartz,Nancy L., 1982. "Market Structure and Innovation," Cambridge Books, Cambridge University Press, number 9780521293853, Diciembre.
  41. Jorde, Thomas M & Teece, David J, 1990. "Innovation and Cooperation: Implications for Competition and Antitrust," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 75-96, Summer.
  42. Kesteloot, Katrien & Veugelers, Reinhilde, 1995. "Stable R&D Cooperation with Spillovers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 651-672, Winter.
  43. Steurs, Geert, 1995. "Inter-industry R&D spillovers: What difference do they make?," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 249-276.
  44. Philippe Aghion & Jean Tirole, 1994. "The Management of Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1185-1209.
  45. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-1306, December.
  46. Ruff, Larry E., 1969. "Research and technological progress in a cournot economy," Journal of Economic Theory, Elsevier, vol. 1(4), pages 397-415, December.
  47. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-121, January.
  48. Ron Jarmin, 1993. "Asymmetric Learning Spillovers," Working Papers 93-7, Center for Economic Studies, U.S. Census Bureau.
  49. Geroski, P A, 1992. "Vertical Relations between Firms and Industrial Policy," Economic Journal, Royal Economic Society, vol. 102(410), pages 138-147, January.
  50. 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.
  51. Wolfgang Becker & Jurgen Peters, 1998. "R&D-Competition Between Vertical Corporate Networks: Market Structure and Strategic R&D-Spillovers," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 6(1), pages 51-72.
  52. 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.
  53. Ward, Michael R & Dranove, David, 1995. "The Vertical Chain of Research and Development in the Pharmaceutical Industry," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 70-87, January.
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as
in new window


Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:taf:ecinnt:v:11:y:2002:i:3:p:179-209. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.