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INNOVATION IN VERTICALLY RELATED MARKETS *
Author(s) -
CHEN YONGMIN,
SAPPINGTON DAVID E. M.
Publication year - 2010
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6451.2010.00414.x
Subject(s) - cournot competition , bertrand competition , downstream (manufacturing) , vertical integration , upstream (networking) , incentive , competition (biology) , industrial organization , economics , process (computing) , business , microeconomics , oligopoly , operations management , engineering , computer science , telecommunications , ecology , biology , operating system
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.