R&D incentives and spillovers in a two-industry model

This paper develops a two-industry model of R&D. A monopolist supplier sells an intermediate good to an oligopolistic buyer industry where firms compete in quantity and quality-enhancing R&D. The supplier can contribute to downstream product improvements by creating spillover knowledge which downstream firms use as a substitute for their own R&D efforts. Even if a market for R&D information fails to exist, the supplier may appropriate an indirect return on R&D for two reasons. Sufficiently high levels of spillover information lead to greater downstream product quality, and spillover information reduces the sunk cost of R&D necessary to enter the downstream industry. Both effects cause an expansion of downstream output and enhance the demand for the supplier's intermediate good. Given sufficiently strong incentives for supplier R&D, the locus of R&D shifts partially from the downstream to the upstream industry. R&D intensities, technological opportunities, and the industry structure of the downstream industry are determined endogenously. The R&D behavior of supplier and buyer firms is characterized by switching equilibria, thereby providing support for the notion of distinct technological regimes. --

Supplier-Buyer networks and Buyer's innovation

Conceptual Framework and Literature. Hypotheses development. Research Design. Results. Discussion and Conclusions

Vertical Organization, Technology Flows and R&D Incentives: An Exploratory Analysis

Despite its importance, the impact of vertical organization on innovation incentives has not been investigated in depth. This paper develops a number of testable hypotheses and then provides a first exploratory empirical analysis, using cross-sectional industry-level data. Two simple stylized facts emerge from the empirical results. First, once a fragmented buyer industry is dependent on a relatively concentrated supply sector, the industry’s own R&D intensity is reduced substantially. Second, vertical technology flows appear to act as substitutes for an industry's own R&D if the receiving industry's concentration is relatively low. Both results are largely consistent with a number of case studies and with theoretical arguments discussed in the paper. ZUSAMMENFASSUNG - (Vertikale Organisation, Technologieflüsse und FuE-Anreize - Eine explorative Studie) Der Einfluß der vertikalen Organisation von Industrien auf Innovationsanreize ist trotz der Bedeutung der Fragestellung noch nicht detailliert untersucht worden. Dieses Papier stellt eine Reihe von testbaren Hypothesen vor und präsentiert eine erste explorative empirische Analyse auf der Basis eines Querschnittsdatensatzes. Zwei empirische Regularitäten können nachgewiesen werden. Zum einen liegt die FuE-Intensität einer Industrie erheblich unter dem üblichen Durchschnitt, wenn die Konzentration der Industrie niedrig ist, aber eine Abhängigkeit von einer konzentrierten Zuliefererindustrie besteht. Zum zweiten scheinen vertikale Technologieflüsse als Substitute für die eigene FuE einer Industrie zu fungieren, sobald die Konzentration der Empfängerindustrie relativ niedrig ist. Beide Resultate sind prinzipiell konsistent mit weiterer Evidenz aus Fallstudien und mit den theoretisch hergeleiteten Hypothesen.vertical structure; research and development; appropriability

Outsourcing when investments are specific and complementary.

Using the universe of large Canadian manufacturing firms in 1988 and 1996, we investigate to what extent outsourcing decision can be explained by a simple property rights model. The unique availability of disaggregate information on outputs as well as inputs permits the construction of a very detailed measure of vertical integration. We also construct five different measures of technological intensity to proxy for investments that are likely to be specific to a buyer-seller relationship. A theoretical model that allows for varying degrees of investment specificity and for complementarities---an externality between buyer and supplier investments---guides the analysis. Our main findings are that (i) greater specificity makes outsourcing less likely; (ii) complementarities between the investments of the buyer and the seller are also associated with less outsourcing; (iii) property rights predictions on the link between investment intensities and optimal ownership are only supported for transactions with low complementarities. High specificity and a low risk of appropriation strengthen the predictions in the model and in the data.

Innovation and the International Firm Structure: Theory and Evidence from German Firm-Level Data

This paper studies the impact of innovation on the organizational structure. The theoretical framework predicts that a larger parental pool of knowledge raises the probability of oshoring. This holds in a national as well as an international context. However, when the producer loses territorial protection, the changeover from non-integration to integration is delayed. Employing data on German rms investing in Eastern Europe nds empirical evidence for the theoretical predictions. The results are robust to dierent measurements and an instrumental variable regression.offshoring; innovation; firm structure

Buyer power and suppliers' incentives to innovate

Buyer power is widely considered to decrease innovation incentives of suppliers. However, there is little empirical evidence for this statement. Our paper analyses how buyer power influences innovation incentives of upstream firms while taking into account the type of competition in the downstream market, namely price and technology. We explore this relationship empirically for a unique dataset containing 1,129 observations of German firms from manufacturing and service sectors including information on the economic dependency of firms from their buyers. Using a generalised Tobit model, we find a negative effect of buyer power on a supplier’s likelihood to start R&D activities. This negative effect is mitigated if the supplier faces powerful buyers operating under strong price competition. There is also weak evidence for a negative effect of buyer power on suppliers’ R&D intensity if the powerful buyer operates under strong technology competition

Technology Transfer in the Global Automotive Value Chain. Lessons from the Turkish Automotive Industry

The automotive industry is one of the main contributors to value added, employment and exports of the Turkish economy and it has undergone major changes since the mid-nineties. Most of the automotive manufacturers in Turkey are either joint ventures or wholly-owned affiliates of multinational companies. Literature on global value chains point to the possibility of technology transfer occurring through backward linkages from automotive manufacturers to their suppliers. We test for the existence and the importance of different types of knowledge and technology transfer mechanisms in the Turkish automotive industry. In addition, characteristics of local suppliers impacting on these transfers and their impact on firm performance are analyzed.Asurvey based on a detailed questionnaire was administered to production/R&D managers of the 158 automotive suppliersoperating in Turkey in 2010. Logistic and ordinal regressionsare used to examine the aforementioned issues. Findings confirm the existence of transfers from customers to their local suppliers on co-design and co-development activities, designing of production tools, development/improvement of quality control methods, cost reduction and design of materials. In addition, econometric analysis points to the fact that these transfers exert a positive effect on the performance of supplier firms.Automotive Industry, Knowledge and Technology Transfer, Multinational Companies (MNCs), Foreign Direct Investment (FDI), Innovation, Research and Development (R&D)

Supplier-Buyer networks and Buyer's innovation

Conceptual Framework and Literature. Hypotheses development. Research Design. Results. Discussion and Conclusions.Conceptual Framework and Literature. Hypotheses development. Research Design. Results. Discussion and Conclusions.LUISS PhD Thesi

Evolution and external impact of MNE subsidiaries in emerging economies : case study evidence from German MNEs in China and India

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Decision support models for supplier development: Systematic literature review and research agenda

The continuing trend towards sourcing components and semi-finished goods for less vertically integrated manufacturing systems globally leads to a dramatic increase in supply options for companies. To ensure that companies benefit from the potentials global sourcing offers, supplier-buyer relationships need to be managed efficiently. Due to the decreasing share of value-adding activities provided in-house, suppliers are more and more considered as an essential contributor to the buying company's competitive position. Consequently, to realize and sustain competitive advantages, companies try to establish institutionalized long-term relationships to their most important suppliers and to actively improve the productivity and performance of their supplier base. To support supplier development in practice, researchers have developed decision support models that provide assistance in selecting and implementing suitable supplier development activities. The aim of this paper is to provide a comprehensive and systematic overview of decision support models for supplier development and to develop a research agenda that helps to identify promising areas for future research in this area. First, typical applications for supplier development as well as potential development measures that can be adopted to improve the performance of suppliers are identified. Secondly, a systematic literature review with a focus on decision support models for supplier development is conducted. Based on the analysis of the literature, we define a research agenda that synthesizes key trends and promising research opportunities and thus highlight areas where more decision support models are needed to foster supplier development initiatives in practice