Abstract
This paper studies the relationship between the structure of supply sectors, vertical technology flows and the R&D incentives of firms in downstream buyer industries. While much of the work in the Schumpeterian tradition has focused on determinants of R&D incentives within a given industry, little research has been produced on the effect of inter-industry linkages, and of vertical organization in particular. The purpose of this paper is to analyze whether the relationship between the structure of a supply industry and the structure of a downstream industry has some bearing on downstream R&D incentives. The main theoretical basis for presuming that such a relationship exists should not be controversial. In any vertical channel of economic activities, rents are being generated and shared horizontally between firms in a given industry. But the vertical rent distribution between the participating industries may also have a bearing on R&D incentives. Firms in any industry may behave strategically to increase the share of rents accruing to their own industry. If these rents have to be shared with many competitors, then naturally the respective incentive is weak. If one firm dominates an industry or has obtained a monopoly position, then this incentive is comparatively strong.
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Harhoff, D. (1999). Vertical Organization, Technology Flows and R&D Incentives. In: Mueller, D.C., Haid, A., Weigand, J. (eds) Competition, Efficiency, and Welfare. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-5559-9_4
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DOI: https://doi.org/10.1007/978-1-4615-5559-9_4
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