Isabel Mota () (CETE, Faculdade de Economia, Universidade do Porto) António Brandão () (CETE, Faculdade de Economia, Universidade do Porto)
Abstract
This paper aims at explaining if firms's decision about location revises when firms cooperate or compete in R&D. For that purpose, it is proposed a three-stage game amongst three firms where each firm decides about location, R&D and output. Firms' decision about location determines a R&D spillover, which is inversely related to the distance between firms. R&D output is assumed to be cost-reducing and exhibit diminishing returns. Cooperation is only allowed in the R&D stage. Our results allow us to conclude that there is a positive relationship between R&D output equilibrium and the distance between firms when firms acts independently. When firms cooperate in R&D, the R&D output for a cooperating firm increases with the degree of information sharing between them, as well as with a reduction of the distance between cooperating firms. Firms' decision about location is also affected by R&D activities: if R&D activities run independently, the clustering of firms only occurs for a convex spillover function; if R&D activities run cooperatively, clustering is always observed if there is an increased information sharing between firms.
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Publisher Info
Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CETE Discussion Papers with number
0404.