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Downstream new product development and upstream process innovation

Author

Listed:
  • Akio Kawasaki

    (Faculty of Economics, Oita University)

  • Tomomichi Mizuno

    (Graduate School of Economics, Kobe University)

  • Kazuhiro Takauchi

    (Faculty of Business and Commerce,Kansai University)

Abstract

This study considers the role of the upstream process research and development (R&D) when downstream develops new products. We build a model in which an upstream firm conducts cost-reducing investment and two downstream firms develop new products. We assume that all products are differentiated. We show that downstream product development promotes upstream investment. We also demonstrate that downstream product development is a strategic complement if upstream R&D efficiency is high, while it is a strategic substitute if it is low. This implies that the occurrence of complementary equilibrium does not need asymmetry in the differentiated final-product markets and is in sharp contrast to the previous study.

Suggested Citation

  • Akio Kawasaki & Tomomichi Mizuno & Kazuhiro Takauchi, 2020. "Downstream new product development and upstream process innovation," Discussion Papers 2022, Graduate School of Economics, Kobe University.
  • Handle: RePEc:koe:wpaper:2022
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    References listed on IDEAS

    as
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    3. 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.
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