This thesis is comprised of three essays on the economic impacts of market structure, R&D and advertising activities. The first studies the impact of cooperative R&D on innovation, welfare, and profitability in vertically related industries where products are differentiated. The model incorporates two vertically related industries, with horizontal spillovers within each industry and vertical spillovers between the two industries. Upstream firms produce a homogeneous intermediate good. Downstream firms provide differentiated products. Three types of R&D cooperation are studied: no cooperation, horizontal cooperation, and vertical cooperation.
The second area of focus is the impact of cooperative R&D and advertising on innovation and welfare in a duopolistic industry. The model incorporates two symmetric firms which produce differentiated products. Firms participate in R&D and advertising activities in the presence of R&D spillovers and advertising spillovers. Advertising spillovers may be positive or negative. Four types of cooperative structures are studied: no cooperation, R&D cooperation, advertising cooperation, R&D and advertising cooperation.
Lastly, the effectiveness of R&D and advertising on market share is examined. Advertising and innovation are two major functions to beat the competition and boost profitability. Surprisingly, however, the importance of the qualitative characteristics of the industry and its strategic initiatives has not yet been adequately addressed in the literature. This chapter empirically examines the critical role of innovation and advertising in the marketing strategy of advanced technological companies. The analysis considers a key marketing metric (market share). The focus of the empirical setting is Network and Internet industry in the U.S. including 150 U.S. manufacturing and nonmanufacturing companies over a 10-year time period.