Vertical research joint ventures
Document Type
Journal article
Source Publication
International Journal of Industrial Organization
Publication Date
1-1-2001
Volume
19
Issue
1-2
First Page
285
Last Page
302
Abstract
We examine the incentives of firms to form vertical research joint ventures (RJVs) which enable an upstream supplier to internalize the positive externality of its innovation on a downstream market, while giving the downstream members a cost advantage over their non-member rivals. Under the cost-sharing rules considered, the upstream member desires a larger RJV compared to the downstream members. R&D subsidies may be detrimental to social welfare. The optimal RJV size for the upstream (downstream) member decreases (increases) with R&D cost and increases (decreases) with the gains from innovation and the size of market. An increase in upstream competition has the effect of enlarging the optimal RJV.
DOI
10.1016/S0167-7187(99)00046-6
Print ISSN
01677187
Publisher Statement
Copyright © 2001 Elsevier Science B.V.
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Banerjee, S., & Lin, P. (2001). Vertical research joint ventures. International Journal of Industrial Organization, 19(1-2), 285-302. doi: 10.1016/S0167-7187(99)00046-6