Title

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.

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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