Downstream new product development and upstream process innovation

Akio Kawasaki, Tomomichi Mizuno and Kazuhiro Takauchi
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Akio Kawasaki: Faculty of Economics, Oita University

No 2022, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: This study considers the role of the upstream process research and development (R&D) when downstream develops new products. We build a model in which an upstream firm conducts cost-reducing investment and two downstream firms develop new products. We assume that all products are differentiated. We show that downstream product development promotes upstream investment. We also demonstrate that downstream product development is a strategic complement if upstream R&D efficiency is high, while it is a strategic substitute if it is low. This implies that the occurrence of complementary equilibrium does not need asymmetry in the differentiated final-product markets and is in sharp contrast to the previous study.

Pages: 19 pages
Date: 2020-12
New Economics Papers: this item is included in nep-com, nep-cse, nep-ind, nep-ino, nep-mic and nep-tid
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http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2020/2022.pdf (application/pdf)

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