Strategic dual sourcing as a driver for free revealing of innovation

Noriaki Matsushima and Laixun Zhao

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: This paper examines the role of dual sourcing (e.g., outside options) in vertical and horizontal relations. In a bilateral monopoly market, if either the upstream or downstream firm has outside options, the other firm could lose from seemingly positive shocks, e.g., market expansion or technology improvements. We extend this setting to a bilateral duopoly market in which each downstream firm has outside options and upstream firms can engage in cost reducing investments and generate technological spillovers. We find that each upstream firm has an incentive to voluntarily generate technological spillovers to its upstream rival if the downstream firms have better outside options.

Date: 2015-05
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2015/DP0936.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0936

Access Statistics for this paper

More papers in ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka Contact information at EDIRC.
Bibliographic data for series maintained by Librarian ().