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R&D investments under endogenous cluster formation

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  • Dawid, Herbert
  • Hellmann, Tim

Abstract

We provide an innovative theory-based explanation for the positive relationship between firms’ R&D intensity and their degree of R&D cooperation. We show that, when oligopolistic firms decide on long-term R&D investment before forming research clusters among competitors, investment incentives are increased by the desire to become a member of an attractive cluster. This can result in over-investment compared to the welfare optimum and compared to a scenario where research clusters are ex-ante fixed. Thereby, as a theoretical contribution, we fully characterize the equilibria of the unanimity game on cluster formation with heterogeneous firms.

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  • Dawid, Herbert & Hellmann, Tim, 2020. "R&D investments under endogenous cluster formation," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 253-283.
    • Handle: RePEc:eee:jeborg:v:174:y:2020:i:c:p:253-283
    DOI: 10.1016/j.jebo.2020.03.039
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    Cited by:

    1. Zhu, Shanshan & Hagedoorn, John & Zhang, Shuhui & Liu, Fengchao, 2021. "Effects of technological distance on innovation performance under heterogeneous technological orientations," Technovation, Elsevier, vol. 106(C).

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    More about this item

    Keywords

    R&D; Cluster formation; Oligopoly;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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