Vertical Integration, Innovation and Foreclosure
Marie-Laure Allain (),
Claire Chambolle () and
Patrick Rey ()
Working Papers from HAL
This paper studies the potential effects of vertical integration on downstream firms' incentives to innovate. Interacting efficiently with a supplier may require information exchanges, which raises the concern that sensitive information may be disclosed to rivals. This may be particularly harmful in case of innovative activities, as it increases the risk of imitation. We show that vertical integration exacerbates this threat of imitation, which de facto degrades the integrated supplier's ability to interact with unintegrated competitors. Vertical integration may thus lead to input foreclosure, thereby raising rivals' cost and limiting both upstream competition and downstream innovation. A similar concern of customer foreclosure arises in the case of downstream bottlenecks.
Keywords: Vertical Integration; Foreclosure; Innovation; Imitation; Firewall.; Firewall (search for similar items in EconPapers)
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Working Paper: Vertical Integration, Innovation and Foreclosure (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-00544494
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