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Hybrid R&D

Author

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  • Goyal, S.
  • Konovalov, A.
  • Moraga-Gonzalez, J.L.

Abstract

We develop a model of R&D competition and collaboration in which individual firms carry out independent in-house research and also undertake joint research projects with other firms. We examine the impact of collaboration on in-house research and explore the circumstances under which a hybrid organization of R&D which combines the two is optimal for firms and society. We find that investments in independent research and in joint research are complementary: an increase in the number of joint projects also increases in-house research. Firm profits are highest under a hybrid organization if the number of firms is small (less than 5) while they are highest with pure in-house research if the number of firms is large (5 or more). However, social welfare is maximized under a hybrid organization of R&D in all cases. Our analysis also yields new results on the role of cooperative R&D. We find that non-cooperative decision making by firms leads to larger R&D investments and higher social welfare than fully cooperative decision making. However, a hybrid form of decision making where there is bilateral cooperation in joint projects and non-cooperative decision making in in-house research yields the highest level of welfare in concentrated industries.

Suggested Citation

  • Goyal, S. & Konovalov, A. & Moraga-Gonzalez, J.L., 2003. "Hybrid R&D," Econometric Institute Research Papers EI 2003-34, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    • Handle: RePEc:ems:eureir:943
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    Cited by:

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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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