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Firms' Location and R&D Cooperation in an Oligopoly with Spillovers

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Author Info

  • 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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File URL: http://www.fep.up.pt/investigacao/cete/papers/dp0404.pdf
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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 0404.

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Length: 31 pages
Date of creation: Oct 2004
Date of revision:
Handle: RePEc:por:cetedp:0404

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Keywords: Location; R&D cooperation; R&D spillovers;

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