PRODUCT INNOVATION AND IMPERFECT COMPETITION IN THE ITALIAN FRUIT-DRINK INDUSTRY

In this paper, the case of the Italian fruit-drink industry is presented to discuss the strategic issues of product-innovation in imperfectly competitive markets. In particular, three main topics are addressed: the incentives to the adoption of innovation-based strategies, R&D investments in imperfectly competitive markets and the role of vertical coordination. To address the topics, a brief description of the industry, a game-theory conceptual framework and a strategic analysis of the marketing channels are proposed. The major conclusions can be summarized as follows: (i) product-innovation strategies are the result of an evaluation of the option value of the R&D investments, the risk of failure and competitors’ strategies (ii) demand pull only may be insufficient to trigger innovation: an efficient retailing system, costs of failure and production efficiency may influence the firm’s strategic approach to innovation.