R&D incentives and spillovers in a two-industry model

Arbeitspapier

This paper develops a two-industry model of R&D. A monopolist supplier sells an intermediate good to an oligopolistic buyer industry where firms compete in quantity and quality-enhancing R&D. The supplier can contribute to downstream product improvements by creating spillover knowledge which downstream firms use as a substitute for their own R&D efforts. Even if a market for R&D information fails to exist, the supplier may appropriate an indirect return on R&D for two reasons. Sufficiently high levels of spillover information lead to greater downstream product quality, and spillover information reduces the sunk cost of R&D necessary to enter the downstream industry. Both effects cause an expansion of downstream output and enhance the demand for the supplier's intermediate good. Given sufficiently strong incentives for supplier R&D, the locus of R&D shifts partially from the downstream to the upstream industry. R&D intensities, technological opportunities, and the industry structure of the downstream industry are determined endogenously. The R&D behavior of supplier and buyer firms is characterized by switching equilibria, thereby providing support for the notion of distinct technological regimes.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 91-06

Classification and Topics

• Classification: Wirtschaft ; Innovation and Invention: Processes and Incentives
• Subject: Industrielle Forschung ; Ökonomischer Anreiz ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Harhoff, Dietmar
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW) ; ZBW – Leibniz Information Centre for Economics
• (where): Mannheim
• (when): 1991

Further information

• Handle: http://hdl.handle.net/10419/29367
• Last update: 10.03.2025, 11:44 AM CET