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Hybrid R&D

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Author Info
Sanjeev Goyal ()
Alexander Konovalov ()
Jose Luis Moraga-Gonzalez ()

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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.

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Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 564.

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Date of creation: 08 Sep 2003
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Handle: RePEc:esx:essedp:564

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Cockburn, Iain M & Henderson, Rebecca M, 1998. "Absorptive Capacity, Coauthoring Behavior, and the Organization of Research in Drug Discovery," Journal of Industrial Economics, Blackwell Publishing, vol. 46(2), pages 157-82, June. [Downloadable!] (restricted)
  2. Arora, Ashish & Gambardella, Alfonso, 1990. "Complementarity and External Linkages: The Strategies of the Large Firms in Biotechnology," Journal of Industrial Economics, Blackwell Publishing, vol. 38(4), pages 361-79, June. [Downloadable!] (restricted)
  3. Sanjeev Goyal & Sumit Joshi, 2000. "Networks of Collaboration in Oligopoly," Tinbergen Institute Discussion Papers 00-092/1, Tinbergen Institute. [Downloadable!]
  4. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  5. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December. [Downloadable!] (restricted)
  6. Rachel E. Kranton & Deborah F. Minehart, 2001. "A Theory of Buyer-Seller Networks," American Economic Review, American Economic Association, vol. 91(3), pages 485-508, June. [Downloadable!] (restricted)
  7. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-20, December. [Downloadable!] (restricted)
  8. Bruno Cassiman & Reinhilde Veugelers, 2002. "R&D Cooperation and Spillovers: Some Empirical Evidence from Belgium," American Economic Review, American Economic Association, vol. 92(4), pages 1169-1184, September. [Downloadable!] (restricted)
  9. Dutta, B. & Nouweland, A. van den & Tijs, S., 1995. "Link Formation in Cooperative Situations," Discussion Paper 35, Tilburg University, Center for Economic Research. [Downloadable!]
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  10. Hagedoorn, John, 2002. "Inter-firm R&D partnerships: an overview of major trends and patterns since 1960," Research Policy, Elsevier, vol. 31(4), pages 477-492, May. [Downloadable!] (restricted)
  11. Goyal, Sanjeev & Joshi, Sumit, 2003. "Networks of collaboration in oligopoly," Games and Economic Behavior, Elsevier, vol. 43(1), pages 57-85, April. [Downloadable!] (restricted)
  12. Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-62, September. [Downloadable!] (restricted)
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  13. James A. Brander & Barbara J. Spencer, 1983. "Strategic Commitment with R&D: The Symmetric Case," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 225-235, Spring. [Downloadable!] (restricted)
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  14. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October. [Downloadable!] (restricted)
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  15. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn. [Downloadable!] (restricted)
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  1. 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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