The strategic timing of R&D agreements
AbstractWe 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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Bibliographic InfoPaper 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.
Length: 38 pages
Date of creation: 2011
Date of revision: 2011
R&D investment; Spillovers; Endogenous Timing.;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-14 (All new papers)
- NEP-COM-2011-05-14 (Industrial Competition)
- NEP-CSE-2011-05-14 (Economics of Strategic Management)
- NEP-INO-2011-05-14 (Innovation)
- NEP-IPR-2011-05-14 (Intellectual Property Rights)
- NEP-SBM-2011-05-14 (Small Business Management)
- NEP-TID-2011-05-14 (Technology & Industrial Dynamics)
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