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R&D Networks

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Author Info
Goyal, S.
Moraga-Gonzalez, J.L. (Erasmus Econometric Institute)

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Abstract

Many markets are characterized by a high level of inter-firm collaboration in R&D activity. This paper develops a simple model of strategic networks which captures two distinctive features of such collaboration activity: bilateral agreements and non-exclusive relationships. We study the effects of collaborations on individual R&D effort, cost reduction, and market performance. We then examine the incentives of firms to form collaborative links and the architecture of strategically stable networks. Our analysis highlights the interaction between market competition and R&D network structure. We find that if firms are Cournot competitors then individual R&D effort is declining in the level of collaborative activity. However, cost reduction and social welfare are maximized under an intermediate level of collaboration. In some cases, firms can gain market power, and even induce exit of rival firms, by forming suitable collaboration agreements. Moreover, under certain circumstances, such asymmetric collaboration networks are also strategically stable. By contrast, if firms operate in independent markets then individual R&D effort is increasing in the level of collaborative activity. Cost reduction and social welfare are maximized under the complete network, which is also strategically stable.

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File URL: http://hdl.handle.net/1765/6945
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Paper provided by Erasmus University Rotterdam, Econometric Institute in its series Econometric Institute Report with number EI 2000-26A Revision_Date: 2009-07-29.

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Date of creation: 14 Sep 2000
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Handle: RePEc:dgr:eureir:1765006945

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Related research
Keywords: strategic alliances; networks; research and development;

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  1. Neslihan Aydogan & Thomas P. Lyon, 2004. "Spatial Proximity and Complementarities in the Trading of Tacit Knowledge," Microeconomics 0404004, EconWPA. [Downloadable!]
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  2. Filippo Vergara Caffarelli, 2009. "Networks with decreasing returns to linking," Temi di discussione (Economic working papers) 734, Bank of Italy, Economic Research Department. [Downloadable!]
  3. Bloch, Francis & Dutta, Bhaskar, 2005. "Communication Networks with Endogenous Link Strength," The Warwick Economics Research Paper Series (TWERPS) 723, University of Warwick, Department of Economics. [Downloadable!]
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  4. Jeon, Doh-Shin & Menicucci, Dominico, 2009. "Interconnection among Academic Journal Websites: Multilateral versus Bilateral Interconnection," IDEI Working Papers 579, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  5. Lorenzo Zirulia, 2005. "R&D Networks with Heterogenous Firms," KITeS Working Papers 167, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised May 2005. [Downloadable!]
  6. Ballester, Coralio & Calvó-Armengol, Antoni & Zenou, Yves, 2005. "Who’s Who in Networks. Wanted: The Key Player," CEPR Discussion Papers 5329, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Huasheng, SONG & Vincent, VANNETELBOSCH, 2005. "International R&D Collaboration Networks," Discussion Papers (ECON - Département des Sciences Economiques) 2005035, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
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  8. Ana, MAULEON & JosŽ, SEMPERE-MONERRIS & Vincent, VANNETELBOSCH, 2005. "Networks of Manufacturers and Retailers," Discussion Papers (ECON - Département des Sciences Economiques) 2005036, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
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  9. Anthony Ziegelmeyer & Katinka Pantz, 2005. "Collaborative Networks in Experimental Triopolies," Papers on Strategic Interaction 2005-38, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
  10. Vincent Vannetelbosch & Ana Mauleon & José Sempere-Monerris, 2005. "R&D Networks Among Unionized Firms," Working Papers 2005.49, Fondazione Eni Enrico Mattei. [Downloadable!]
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  11. Gary H. Jefferson & Zhong Kaifeng, 2002. "An Investigation of Firm-Level R&D Capabilities in East Asia," William Davidson Institute Working Papers Series 583, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  12. Michael Kosfeld, . "Network Experiments," IEW - Working Papers iewwp152, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  13. Zirulia,Lorenzo, 2004. "The evolution of R&D networks," Research Memoranda 007, Maastricht : MERIT, Maastricht Economic Research Institute on Innovation and Technology. [Downloadable!]
  14. Rodrigo J. Harrison & Roberto Munoz, 2003. "Stability and Equilibrium Selection in a Link Formation Game," Game Theory and Information 0306004, EconWPA. [Downloadable!]
  15. J. Vernon Henderson & Mohammad Arzaghi, 2005. "Networking Off Madison Avenue," Working Papers 05-15, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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  16. Cowan,Robin, 2004. "Network models of innovation and knowledge diffusion," Research Memoranda 016, Maastricht : MERIT, Maastricht Economic Research Institute on Innovation and Technology. [Downloadable!]
  17. Andrea Galeotti & Sanjeev Goyal & Matthew O. Jackson & Fernando Vega-Redondo & Leeat Yariv, 2008. "Network Games," Economics Working Papers ECO2008/07, European University Institute. [Downloadable!]
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