Retailer Concentration and Product Innovation in Food Manufacturing

The increasing concentration of retailing in many countries (particularly in Europe) is a cause for concern for competition authorities. In a formal model, we argue that retailer market power influences upstream firms` incentives to introduce new products. On the basis of a survey of German food manufacturing firms, the results of a negative binomial regression model suggest a detrimental effect of retailer market power on product innovation. This effect is mitigated if manufacturing firms also have some market power (countervailing power). Innovations are positively related to the firms` market share