Abstract: The vertical relationship of supply chain was selected as the research background， and a vertical market structure was constructed， consisting of a monopolistic manufacturer and two competing retailers. The two-stage game model was used to study the effect of buyer power caused by the downstream retailer’s scale differences on the upstream manufacturer’s technological innovation decision. The results show that the enhancement of the downstream large-scale retailer’s buyer power can effectively promote the innovation of the upstream manufacturer; at the same time， the retailer’s product price and the upstream manufacturer’s profit will decrease along with the enhancement of buyer power. However， the impact on the wholesale price is uncertain， which mainly depends on the strength of buyer power. When the buyer power is weak， the manufacturer will increase the small-scale retailer’s wholesale price along with the enhancement of large-scale retailer’s buyer power. When the buyer power is strong， the upstream manufacturer will decrease the small-scale retailer’s price along with the enhancement of large-scale retailer’s buyer power.

Key words: buyer power, technological innovation, innovation efficiency, retailer’s scale difference, vertical relationship