Study of Vertical Spillover Effect on Independent R&D and Vertical RJV

Abstract

This study is based on the assumption that on supply chain there are two upstream manufacturers and countless downstream vendors in perfect competitive market structure. Analysed the following two innovation forms: independent R&D and vertical RJV. Then do some research on the vertical spillover effect on enterprise R&D activities and social welfare in the two conditions. The result shows that, vertical spillover effect doesn't bring apparent benefit to downstream enterprises as in the imagination, the critical point of vertical spillover under vertical RJV is lower that independent R&D, vertical spillover effect harms the interests of the enterprises which joint vertical RJV. To ensure the social welfare maximum, government should encourage enterprises to build vertical RJV and subside the enterprises which take R&D activities according to vertical spillover level.