Organizational structure and technological investment

Altres ajuts: Severo Ochoa Programme (CEX2019-915-S), Japan Society for the Promotion of Science (JSPS), KAKENHI Grant Numbers JP15H03349, JP15H05728, JP17H00984, JP18H00847, JP18K01519, JP18K01593, JP19H01483, and JP20H05631 Strategic Young Researcher Overseas Visits Program for Accelerating Brain Circulation (JSPS), Osaka University for its International Joint Research Promotion Program, Joint Usage/Research Center for Behavioral Economics at the ISER, Osaka University ProgramWe analyze firms' decisions on their vertical organization, taking into account the characteristics of both the final good competition and the R&D process. We consider two vertical chains where upstream sectors invest in R&D. Such investment determines the production costs of the downstream sector and has spillovers on the production and the investment costs of the rival. In a general setting, we show that the equilibrium organizational structure depends on whether the situation considered belongs to one of four possible cases. We study how final good market competition, R&D spillover, and R&D incentives interact to determine the equilibrium vertical structur