Abstract: With the emergence and development of large retailers, such as Walmart, Carrefour, the structures of channel power in supply chain have become more and more complicated. In some supply chains manufacturers have more channel power than retailers while in other supply chains retailers have more channel power than manufacturers. Also there are some supply chains in which manufacturers and retailers have almost equal channel power. An every obvious and important question emerging from this background:how will these different channel power structures effect the decisions in the supply chain? Thia is the main prolem considered in this paper. More specifically, the innovation decision is focused on which is a pretty important research topic in supply chain and studies the impacts of channel power and R&D spillover on innovation decisions of competitive manufactures, also on corresponding profits of supply chain. Firstly, Manufacturer Stackerlberg Model (MS), Vertical Nash Model (VN) and Retailer Stackerlberg Model (RS) are constructed to present three different channel power structures. And then the innovation decisions of competitive manufacturers is analyzed in these three different models. By comparing the decisions in these models, the impacts of channel power and R&D spillover on innovation decisions are obtained. The main findings are following:1) The level of innovation reduces with the increasing of retailer's channel power; 2) The impacts of R&D spillover on optimal innovation depend on the competition intensity between manufactures. More specifically, when the competition intensity between manufacturers is low, the optimal level of innovation increases with the retailer's channel power; when the competition intensity is high, the optimal level of innovation reduces with the retailer's channel power; when the competition intensity is medium, the optimal level of innovation first increases then reduces with the retailer's channel power. 3) The conclusions of 2) don't change under different channel power condition, but the critical values in conclusion 2) will change. 4) The impact of channel power on profits of supply chain depends on the competition intensity and R&D spillover. These conclusions have some inspiration for supply chain managers, especially under the background of increasing channel power of retailers.

Key words: channel power, R&D spillover, manufacturers' competition, innovation intensity, supply chain profits