Does the European model of end-to-end competition or the US model of worksharing provide stronger innovation incentives for incumbent postal operators? We answer this question based on a two stage model with price competition and product differentiation. We find that incentives for process innovation in the upstream activities are stronger under end-to-end competition. Incentives for process innovation in delivery are stronger under worksharing, assuming that the entrant's demand under worksharing is higher than the decline in the incumbent's demand. Regarding product innovation, incentives depend on the access price.