No Pain, No Gain: An R&D Model with Endogenous Absorptive Capacity
AbstractI investigate how the introduction of the absorptive-capacity hypothesis changes the results of strategic investment games with exogenous spillover. As a novelty, this paper distinguishes between two different components of R&D: absorptive R&D and inventive R&D . It is demonstrated that a new effect appears: The absorptive-capacity effect now counteracts the free-rider effect of the traditional models. The findings show that firms will invest more in R&D to strengthen absorptive capacity when the spillover parameter is higher. To learn from its competitor, a firm needs to develop its absorptive capacity: no pain, no gain.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 165 (2009)
Issue (Month): 3 (September)
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Web page: http://www.mohr.de/jite
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Find related papers by JEL classification:
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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