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R&D Incentives in an Upstream-Downstream Structure

Tarun Kabiraj () and Mouli Modak

Indian Economic Review, 2016, vol. 51, issue 1, 43-68

Abstract: This paper studies R&D incentives of a non-producing firm in an upstream-downstream structure for three types of technologies, viz., upstream technology, downstream technology and common technology. We consider both the cases of exogenous and endogenous innovation, and the case when common technology innovation leads to spillovers. Our results are then compared and contrasted with those when an insider (i.e., upstream or downstream) firm is engaged in research. The size of the innovation can be larger compared to the third firm R&D case. While there can be a conflict between private and socially optimal choice of technology, we show that socially optimal choice is implementable.

Keywords: Vertical Structure; R&D and Process Innovation; Upstream; Downstream and Common Technology Innovation; Spillovers. (search for similar items in EconPapers)
JEL-codes: D43 L13 O30 (search for similar items in EconPapers)
Date: 2016
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