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Strategic Timing in R&D Agreements

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Author Info

  • Marco Marini

    ()
    (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza")

  • Maria Luisa Petit

    ()
    (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza")

  • Roberta Sestini

    ()
    (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza")

Abstract

We present a model of endogenous formation of R&D agreements among firms in which also the timing of R&D investments is made endogenous. The purpose is to bridge two usually separate streams of literature, the endogenous formation of R&D alliances and the endogenous timing literature. This allows to consider the formation of R&D agreements over time. It is shown that, when both R&D spillovers and investment costs are sufficiently low, firms may find difficult to maintain a stable agreement due to the strong incentive to invest noncooperatively as leaders. In such a case, the stability of an R&D agreement requires that the joint investment occurs at the initial stage, thus avoiding any delay. When instead spillovers are sufficiently high, cooperation in R&D constitutes a profitable option, although firms also possess an incentive to sequence their investment over time. Finally, when spillovers are asymmetric and the knowledge mainly leaks from the leader to the follower, to invest as follower becomes extremely profitable, making R&D alliances hard to sustain unless firms strategically delay their joint investment in R&D.

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File URL: http://www.dis.uniroma1.it/~bibdis/RePEc/aeg/report/2012-07.pdf
File Function: Revised version, 2012
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Bibliographic Info

Paper provided by Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza" in its series DIAG Technical Reports with number 2012-07.

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Length: 43 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:aeg:report:2012-07

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Keywords: R&D Investment; Spillovers; Endogenous Timing; R&D Alliances; Endogenous Research Cartels;

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References

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  2. AMIR, Rabah & WOODERS, John, 1997. "One-way spillovers, endogenous innovator/imitator roles and research joint ventures," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1997027, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  6. Roberto Hern·n & Pedro L. MarÌn & Georges Siotis, 2003. "An empirical evaluation of the determinants of Research Joint Venture Formation," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 51(1), pages 75-89, 03.
  7. Duso, Tomaso & Pennings, Enrico & Seldeslachts, Jo, 2010. "Learning dynamics in research alliances: A panel data analysis," Research Policy, Elsevier, Elsevier, vol. 39(6), pages 776-789, July.
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  13. Marini, Marco A. & Currarini, Sergio, 2003. "A sequential approach to the characteristic function and the core in games with externalities," MPRA Paper 1689, University Library of Munich, Germany, revised 2003.
  14. Petit, Maria Luisa & Tolwinski, Boleslaw, 1997. "Technology sharing cartels and industrial structure," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 15(1), pages 77-101, February.
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  16. Ray, Debraj, 2007. "A Game-Theoretic Perspective on Coalition Formation," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199207954, October.
  17. Raymond De Bondt & Irene Henriques, 1995. "Strategic Investment with Asymmetric Spillovers," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 28(3), pages 656-74, August.
  18. Crampes, Claude & Langinier, Corinne, 2003. "Following the Follower in the Innovation Game," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 216, Institut d'Économie Industrielle (IDEI), Toulouse.
  19. Petit, Maria Luisa & Sanna-Randaccio, Francesca & Sestini, Roberta, 2009. "Asymmetric knowledge flows and localization with endogenous R&D: A dynamic analysis," Economic Modelling, Elsevier, Elsevier, vol. 26(2), pages 536-547, March.
  20. Rabah Amir & Filomena Garcia & Christine Halmenschlager & Joana Pais, 2011. "R&D As A Prisoner'S Dilemma And R&D‐Avoiding Cartels," Manchester School, University of Manchester, University of Manchester, vol. 79(1), pages 81-99, January.
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