IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-03042941.html
   My bibliography  Save this paper

Competition and private R&D investment

Author

Listed:
  • Thomas Grebel

    (TU - Technische Universität Ilmenau)

  • Lionel Nesta

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

Abstract

We investigate the determinants of the sign of Research and Development reaction functions of rival firms. Using a two-stage n-firm Cournot competition game, we show that this sign depends on four types of environments in terms of product rivalry and technology spillovers. We test the predictions of the model on the world's largest manufacturing corporations. Assuming that firms make R&D investments based on the R&D effort of the representative rival company, we develop a dynamic panel data model that accounts for the endogeneity of the decision of the rival firm. Empirical results thoroughly corroborate the validity of the theoretical model.

Suggested Citation

  • Thomas Grebel & Lionel Nesta, 2020. "Competition and private R&D investment," Post-Print hal-03042941, HAL.
    • Handle: RePEc:hal:journl:hal-03042941
    DOI: 10.1371/journal.pone.0232119
    Note: View the original document on HAL open archive server: https://hal.science/hal-03042941
    as

    Download full text from publisher

    File URL: https://hal.science/hal-03042941/document
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0232119?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-1137, December.
    2. Richard J. Rosen, 1991. "Research and Development with Asymmetric Firm Sizes," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 411-429, Autumn.
    3. Xulia González & Jordi Jaumandreu & Consuelo Pazo, 2005. "Barriers to Innovation and Subsidy Effectiveness," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 930-949, Winter.
    4. Sean Cleary, 1999. "The Relationship between Firm Investment and Financial Status," Journal of Finance, American Finance Association, vol. 54(2), pages 673-692, April.
    5. Nicholas Bloom & Mark Schankerman & John Van Reenen, 2013. "Identifying Technology Spillovers and Product Market Rivalry," Econometrica, Econometric Society, vol. 81(4), pages 1347-1393, July.
    6. Cohen, Wesley M & Klepper, Steven, 1996. "A Reprise of Size and R&D," Economic Journal, Royal Economic Society, vol. 106(437), pages 925-951, July.
    7. Vives, Xavier, 1990. "Information and competitive advantage," International Journal of Industrial Organization, Elsevier, vol. 8(1), pages 17-35.
    8. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-583, June.
    9. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2001. "The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools," NBER Working Papers 8498, National Bureau of Economic Research, Inc.
    10. Baum, Christopher F. & Caglayan, Mustafa & Stephan, Andreas & Talavera, Oleksandr, 2008. "Uncertainty determinants of corporate liquidity," Economic Modelling, Elsevier, vol. 25(5), pages 833-849, September.
    11. Hanna Hottenrott & Bettina Peters, 2012. "Innovative Capability and Financing Constraints for Innovation: More Money, More Innovation?," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1126-1142, November.
    12. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    13. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    14. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    15. De Bondt, Raymond & Veugelers, Reinhilde, 1991. "Strategic investment with spillovers," European Journal of Political Economy, Elsevier, vol. 7(3), pages 345-366, October.
    16. Lionel Nesta & Pier Paolo Saviotti, 2005. "Coherence Of The Knowledge Base And The Firm'S Innovative Performance: Evidence From The U.S. Pharmaceutical Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 53(1), pages 123-142, March.
    17. Blundell, Richard & Griffith, Rachel & Windmeijer, Frank, 2002. "Individual effects and dynamics in count data models," Journal of Econometrics, Elsevier, vol. 108(1), pages 113-131, May.
    18. Gabriel Y. Weintraub & C. Lanier Benkard & Benjamin Van Roy, 2008. "Markov Perfect Industry Dynamics With Many Firms," Econometrica, Econometric Society, vol. 76(6), pages 1375-1411, November.
    19. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
    20. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    21. Henriques, Irene, 1990. "Cooperative and Noncooperative R&D in Duopoly with Spillovers: Comment," American Economic Review, American Economic Association, vol. 80(3), pages 638-640, June.
    22. Lin, Ping & Saggi, Kamal, 2002. "Product differentiation, process R&D, and the nature of market competition," European Economic Review, Elsevier, vol. 46(1), pages 201-211, January.
    23. Patel, Pari & Pavitt, Keith, 1997. "The technological competencies of the world's largest firms: Complex and path-dependent, but not much variety," Research Policy, Elsevier, vol. 26(2), pages 141-156, May.
    24. Breschi, Stefano & Lissoni, Francesco & Malerba, Franco, 2003. "Knowledge-relatedness in firm technological diversification," Research Policy, Elsevier, vol. 32(1), pages 69-87, January.
    25. Stavins, Joanna, 1995. "Model Entry and Exit in a Differentiated-Product Industry: The Personal Computer Market," The Review of Economics and Statistics, MIT Press, vol. 77(4), pages 571-584, November.
    26. Lionel Nesta & Pier Paolo Saviotti, 2005. "Coherence of the Knowledge Base and the Firms’ Innovative Performance. Evidence from the Bio-Pharmaceutical Industry," SciencePo Working papers Main hal-03417696, HAL.
    27. Amir, Rabah & Erickson, Philip & Jin, Jim, 2017. "On the microeconomic foundations of linear demand for differentiated products," Journal of Economic Theory, Elsevier, vol. 169(C), pages 641-665.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas Grebel & Lionel Nesta, 2017. "Technological Spillovers, Product Market Rivalry and R&D Investment," GREDEG Working Papers 2017-34, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    2. Choi, Mincheol & Lee, Chang-Yang, 2021. "Technological diversification and R&D productivity: The moderating effects of knowledge spillovers and core-technology competence," Technovation, Elsevier, vol. 104(C).
    3. Burak Dindaroğlu, 2018. "Determinants of patent quality in U.S. manufacturing: technological diversity, appropriability, and firm size," The Journal of Technology Transfer, Springer, vol. 43(4), pages 1083-1106, August.
    4. Haucap, Justus & Rasch, Alexander & Stiebale, Joel, 2019. "How mergers affect innovation: Theory and evidence," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 283-325.
    5. Ufuk Akcigit & William R. Kerr, 2018. "Growth through Heterogeneous Innovations," Journal of Political Economy, University of Chicago Press, vol. 126(4), pages 1374-1443.
    6. Lorenz, Steffi, 2015. "Diversität und Verbundenheit der unternehmerischen Wissensbasis: Ein neuartiger Messansatz mit Indikatoren aus Innovationsprojekten," Discussion Papers on Strategy and Innovation 15-01, Philipps-University Marburg, Department of Technology and Innovation Management (TIM).
    7. Samuli Leppälä, 2020. "Innovation, R&D Spillovers, and the Variety and Concentration of the Local Industry Structure," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(3), pages 1231-1255, July.
    8. De Bondt, Raymond, 1997. "Spillovers and innovative activities," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 1-28, February.
    9. Cohen, Wesley M., 2010. "Fifty Years of Empirical Studies of Innovative Activity and Performance," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 129-213, Elsevier.
    10. Thomas Bolli & Martin Woerter, 2013. "Technological Diversification and Innovation Performance," KOF Working papers 13-336, KOF Swiss Economic Institute, ETH Zurich.
    11. Barge-Gil, Andrés & López, Alberto, 2014. "R&D determinants: Accounting for the differences between research and development," Research Policy, Elsevier, vol. 43(9), pages 1634-1648.
    12. Oh, Jong-Min, 2017. "Absorptive capacity, technology spillovers, and the cross-section of stock returns," Journal of Banking & Finance, Elsevier, vol. 85(C), pages 146-164.
    13. Leibowicz, Benjamin D., 2018. "Welfare improvement windows for innovation policy," Research Policy, Elsevier, vol. 47(2), pages 390-398.
    14. Dibiaggio, Ludovic & Nasiriyar, Maryam & Nesta, Lionel, 2014. "Substitutability and complementarity of technological knowledge and the inventive performance of semiconductor companies," Research Policy, Elsevier, vol. 43(9), pages 1582-1593.
    15. Antonelli Cristiano & Colombelli Alessandra, 2013. "Knowledge cumulability and complementarity in the knowledge generation function," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201305, University of Turin.
    16. Seh-Hyun Yoo & Chang-Yang Lee, 2023. "Technological diversification, technology portfolio properties, and R&D productivity," The Journal of Technology Transfer, Springer, vol. 48(6), pages 2074-2105, December.
    17. Dirk Czarnitzki & Kornelius Kraft, 2012. "Spillovers of innovation activities and their profitability," Oxford Economic Papers, Oxford University Press, vol. 64(2), pages 302-322, April.
    18. Cassiman, Bruno, 2000. "Research joint ventures and optimal R&D policy with asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 283-314, February.
    19. Müller, Aranja & Zaby, Alexandra K., 2019. "Research joint ventures and technological proximity," Research Policy, Elsevier, vol. 48(5), pages 1187-1200.
    20. Mahdiyeh Entezarkheir & Saeed Moshiri, 2021. "Innovation spillover and merger decisions," Empirical Economics, Springer, vol. 61(5), pages 2419-2448, November.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-03042941. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.