INNOVATION IN VERTICALLY RELATED MARKETS* |
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| Authors: | YONGMIN CHEN DAVID E M SAPPINGTON |
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| Institution: | 1. Department of Economics, University of Colorado, Boulder, Colorado 80309, U.S.A.e‐mail: Yongmin.Chen@colorado.edu;2. Department of Economics, University of Florida, Gainesville, Florida 32611, U.S.A.e‐mail: sapping@ufl.edu |
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| 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. |
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