This paper describes how process and product innovations respond to cost and demand changes. In the present model firms simultaneously choose process and product innovations within a model of vertical differentiation and uncovered market. We show that the outcome is unique both in monopoly and in the duopoly. In these outcomes, a demand increase (decrease) enhances (depresses) both process and product innovation, while an increase (decrease) in production costs stimulates (depresses) process innovation but lowers (increases) product one. The insight for these results relies on the scale effect of innovation. Our result can be placed in the ongoing debate on complementarity and substitutability of process and product innovation.

本文介绍了流程和产品创新如何响应成本和需求变化。在目前的模型中，企业在垂直差异化和未发现的市场模型中同时选择过程和产品创新。我们表明，无论是在垄断还是在双头垄断中，结果都是独特的。在这些结果中，需求增加（减少）会增强（降低）过程和产品创新，而生产成本的增加（减少）会刺激（降低）过程创新，但会降低（增加）产品创新。这些结果的洞察力取决于创新的规模效应。我们的结果可以放在正在进行的关于过程和产品创新的互补性和可替代性的辩论中。