Abstract:Based on a two tier supply chain consisting of an upstream firm which is Stackelberg follower, and a downstream firm which is Stackelberg leader, there are technology spillover. The first we study the R D strategy of upstream and downstream firms and the problems of product price, output and profitability in the case of non-cooperative R D, and this is the benchmark, and then we study the R D strategy and the problems of product price, output and profitability in the case of cooperative R D. Our research shows that, compared with the non-cooperative R D case, in the case of cooperative R D, cooperative R D improve the level of the R D, and product’s prices fall, equilibrium output increases, the equilibrium of the supply chain profit increases, and through the contract of sharing revenue and appropriate punishment mechanism can coordinate the supply chain ; in the case of cooperative R D, the R D level of the upstream and downstream firms and the equilibrium of the supply chain profit increases with the increase of technology spillover coefficient.