Disclosure of R&D Knowledge With Partial Cross-Ownership in a Vertically Mixed Market

Abstract

In this paper, we investigate the impact of partial vertical cross-ownership on optimal R&D knowledge disclosure in a vertically mixed market with an upstream firm supplying competing downstream public and private firms. The results show that under vertical separation and forward cross-ownership, the downstream public firm fully discloses its R&D knowledge, whereas the downstream private firm does not disclose its R&D knowledge. Under backward cross-ownership, both downstream public and private firms fully disclose their information. Furthermore, we find that the upstream firm and the downstream private firm favor backward cross-ownership. Finally, we find that privatization policies lead to higher social welfare, but their impact on R&D knowledge disclosure varies among different downstream firms.