Abstract: For an oligopolistic duopoly system consisting of two competing supply chains, where each supply chain is composed of a manufacturer and a supplier, considering the situation of supplier innovation, this study examines the impacts of the manufacturer's supplier integration decision on the supplier's development investment and innovation input. This study also analyzes the impacts of the manufacturer's supplier development capability and the supplier's innovation capability on the manufacturer's choice of supplier integration decision. The findings are shown as follows: (1) The manufacturer with strong supplier development capabilities integrates suppliers, which leads to an increase (or decrease) in its own (or its competitor's) investment in supplier development and innovation. For the manufacturer with weak supplier development capabilities, the impact of integrating suppliers on its own (or its competitor's) investment in supplier development and innovation depends on the heterogeneity of supplier development capabilities, the innovation capabilities of suppliers, and the integration decisions of its competitors. (2) The manufacturer with strong supplier development capabilities always tends to integrate suppliers, while whether the manufacturer with weak supplier development capabilities integrates suppliers depends on the heterogeneity of supplier development capabilities and the innovation capabilities of suppliers.(3) When the supplier development capabilities of the two manufacturers are the same, both sides should integrate their respective suppliers and reduce the investment in supplier development to obtain more benefits.

Key words: Innovation Input, Competition, Supplier Development, Supplier Integration, Supplier Investment