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The strategic timing of R&D agreements

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Author Info

  • Marco Marini

    ()
    (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")

  • Maria Luisa Petit

    ()
    (Department of Computer and System Sciences "Antonio Ruberti", Università di Roma "La Sapienza")

  • Roberta Sestini

    ()
    (Department of Computer and System Sciences "Antonio Ruberti", Università di Roma "La Sapienza")

Abstract

We present a model of endogenous formation of R&D agreements among firms in which also the timing of R&D investment is made endogenous. The purpose is to bridge two usually separate streams of literature, the noncooperative formation of R&D alliances and the endogenous timing literature. Our approach allows to consider the formation of R&D agreements over time. It is shown that, when both R&D spillovers and investment costs are sufficiently low, firms may find difficult to maintain a stable R&D agreement due to the strong incentive to invest noncooperatively as leaders. In such a case, to be stable a R&D agreement requires that the joint investment occurs at the initial stage, avoiding any delay. When instead R&D spillover rates are sufficiently high, the cooperation in R&D constitutes a profitable option, although firms also possess the incentive to sequence their investment over time. Finally, when spillovers are asymmetric and the knowledge leaks mainly from the leader to the follower, to invest as follower becomes extremely profitable, making R&D alliances hard to sustain unless firms strategically delay their joint investment in R&D.

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File URL: http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_11_04.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini in its series Working Papers with number 1104.

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Length: 38 pages
Date of creation: 2011
Date of revision: 2011
Handle: RePEc:urb:wpaper:11_04

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Web page: http://www.econ.uniurb.it/
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Related research

Keywords: R&D investment; Spillovers; Endogenous Timing.;

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  1. van Damme, Eric & Hurkens, Sjaak, 2004. "Endogenous price leadership," Games and Economic Behavior, Elsevier, vol. 47(2), pages 404-420, May.
  2. von Stengel, Bernhard, 2010. "Follower payoffs in symmetric duopoly games," Games and Economic Behavior, Elsevier, vol. 69(2), pages 512-516, July.
  3. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-64, July.
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Cited by:
  1. Sergio Currarini & Marco Marini, 2011. "Coalitional Approaches to Collusive Agreements in Oligopoly Games," Working Papers 1113, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2011.

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