Abstract: Innovative practices carried out by an upstream player create value for other node enterprises, securing a supply chain which is free from the zero-sum game in terms of information sharing. Nevertheless, a competitor is likely to break the original balance and has a profound impact on the demand forecasting information sharing made by its retailer. Thus, it is necessary to study the problem of demand forecasting information sharing made by a retailer when the supply chain upstream is in horizontal competition by taking manufactures' innovation input in account. A decision model of supply chain which consists of two competing manufacturers making cost-reduction innovations and one retailer in the knowledge of the demand forecasting information has been considered and then analysis has been made on the equilibrium decisions in different information sharing scenarios. Afterwards, the impact of cost-reduction innovations made by manufacturers on the value of demand forecasting information sharing has been examined by comparing the ex ante profits of three players in different information sharing scenarios. A mechanism is figured out to motivate retailer to share demand forecasting information based on the innovation input by competing manufacturers, which leads to the Pareto improvement in the upstream competing supply chain. It finds:
(1) The decision on innovation input made by a manufacturer depends on its competitor and the retailer in the knowledge of the demand forecasting information sharing. Suppose the demand in future market is positive: when innovation capability of a competing manufacturer is weakening, its largest innovation input can be seen if it is informed with the demand forecasting information as well as its competitor; when capability grows strong, being the only one informed of the two can ensure its largest innovation input.
(2) Due to the innovative practices targeting at cost reduction conducted by two competing manufacturers, there is chance that the retailer might be benefited by sharing demand forecasting information. The more competitive upstream manufactures become, the more valuable the information sharing made by downstream retailer is.
(3) When manufacturers are highly innovative, complete information sharing is not only their most favorable information state but also the dominant information sharing strategy for the retailer. Therefore, it can be considered as the most ideal information sharing state for the three players. And meanwhile manufacturers' innovation input is great. However, when manufacturers are less innovative, the retailer is reluctant to share the demand forecasting information with them. In this situation, the two competing manufacturers can motivate the downstream retailer to share its private demand information through paying information sharing expense. The range of information sharing expenses is widening as the innovation capability, upstream competition intensity, forecasting accuracy and stochastic demand volatility show an increase.
These findings are of practical significance to manage supply chain made up by two competing manufactures and one retailer. This article provides insights into how a retailer shares demand forecasting information with manufacturers, how manufacturers determine their decisions on innovation input and motivate a retailer to share forecasting information.

Key words: innovation investment, manufacturers' competition, demand information sharing, information sharing incentive