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No Pain, No Gain: An R&D Model with Endogenous Absorptive Capacity

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Author Info
Anna Hammerschmidt
Abstract

I 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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Publisher Info
Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 165 (2009)
Issue (Month): 3 (September)
Pages: 418-437
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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200909)165:3_418:npngar_2.0.tx_2-h

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Find related papers by JEL classification:
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - 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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This page was last updated on 2009-12-10.

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