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The road not taken: competition and the R&D portfolio

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  • Igor Letina

Abstract

This article examines the effects of market structure on the variety of research projects undertaken and the amount of duplication of research. A characterization of the equilibrium market portfolio of R&D projects and the socially optimal portfolio is provided. It is shown that a merger decreases the variety of developed projects and decreases the amount of duplication of research. An increase in the intensity of competition among firms leads to an increase in the variety of developed projects and a decrease in the amount of duplication of research.
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  • Igor Letina, 2016. "The road not taken: competition and the R&D portfolio," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 433-460, May.
    • Handle: RePEc:bla:randje:v:47:y:2016:i:2:p:433-460
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    File URL: http://hdl.handle.net/10.1111/rand.2016.47.issue-2
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    Cited by:

    1. José Luis Moraga‐González & Evgenia Motchenkova & Saish Nevrekar, 2022. "Mergers and innovation portfolios," RAND Journal of Economics, RAND Corporation, vol. 53(4), pages 641-677, December.
    2. Christoph Carnehl & Johannes Schneider, 2021. "On Risk and Time Pressure: When to Think and When to Do," Papers 2111.07451, arXiv.org, revised Mar 2022.
    3. Bourreau, Marc & Doğan, Pınar & Manant, Matthieu, 2016. "Size of RJVs with partial cooperation in product development," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 77-106.
    4. Philipp Brunner & Igor Letina & Armin Schmutzler, 2022. "Research Joint Ventures: The Role of Financial Constraints," Diskussionsschriften dp2205, Universitaet Bern, Departement Volkswirtschaft.
    5. Kaustav Das & Nicolas Klein, 2020. "Do Stronger Patents Lead to Faster Innovation? The Effect of Duplicative Search," Discussion Papers in Economics 20/03, Division of Economics, School of Business, University of Leicester.
    6. Jean-Michel Benkert & Igor Letina, 2020. "Designing Dynamic Research Contests," American Economic Journal: Microeconomics, American Economic Association, vol. 12(4), pages 270-289, November.
    7. Anna Rita Bennato & Stephen Davies & Franco Mariuzzo & Peter Ormosi, 2019. "Mergers and Innovation: Evidence from the Hard Disk Drive Market," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2018-04v3, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    8. Bavly, Gilad & Heller, Yuval & Schreiber, Amnon, 2022. "Social welfare in search games with asymmetric information," Journal of Economic Theory, Elsevier, vol. 202(C).
    9. Steven Callander & Niko Matouschek, 2022. "The Novelty of Innovation: Competition, Disruption, and Antitrust Policy," Management Science, INFORMS, vol. 68(1), pages 37-51, January.
    10. Lefouili, Yassine & Madio, Leonardo, 2023. "Market Structure and Investments : A Progress Report," TSE Working Papers 23-1491, Toulouse School of Economics (TSE), revised Mar 2024.
    11. Stefano Comino & Fabio M. Manenti, 2022. "Patent portfolios and firms’ technological choices," Journal of Economics, Springer, vol. 137(2), pages 97-120, October.
    12. Joshua L. Krieger & Xuelin Li & Richard T. Thakor, 2022. "Find and Replace: R&D Investment Following the Erosion of Existing Products," Management Science, INFORMS, vol. 68(9), pages 6552-6571, September.
    13. Schmutzler, Armin & Letina, Igor & Seibel, Regina, 2020. "Start-up Acquisitions and Innovation Strategies," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224631, Verein für Socialpolitik / German Economic Association.
    14. Hagspiel, Verena & Kort, Peter M. & Nunes, Cláudia & Pimentel, Rita & Støre, Kristian, 2021. "Capacity optimization of an innovating firm," International Journal of Production Economics, Elsevier, vol. 233(C).
    15. Motta, Massimo & Tarantino, Emanuele, 2021. "The effect of horizontal mergers, when firms compete in prices and investments," International Journal of Industrial Organization, Elsevier, vol. 78(C).
    16. Richard J. Gilbert, 2019. "Competition, Mergers, and R&D Diversity," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(3), pages 465-484, May.
    17. Giulio Federico & Fiona Scott Morton & Carl Shapiro, 2019. "Antitrust and Innovation: Welcoming and Protecting Disruption," NBER Chapters, in: Innovation Policy and the Economy, Volume 20, pages 125-190, National Bureau of Economic Research, Inc.
    18. Bennato, Anna Rita & Davies, Stephen & Mariuzzo, Franco & Ormosi, Peter, 2021. "Mergers and innovation: Evidence from the hard disk drive market," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    19. Esmée Dijk & José Luis Moraga-González & Evgenia Motchenkova, 2023. "Start-up Acquisitions and the Entrant’s and Incumbent’s Innovation Portfolios," Tinbergen Institute Discussion Papers 23-047/VII, Tinbergen Institute.
    20. Igor Letina & Armin Schmutzler & Regina Seibel, 2020. "Killer acquisitions and beyond: policy effects on innovation strategies," ECON - Working Papers 358, Department of Economics - University of Zurich, revised Jul 2023.
    21. Dorgyles C. M. Kouakou, 2023. "Competing against ‘invisibles’: the effect of competition from informal firms on formal firms’ R&D," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(1), pages 87-117, March.
    22. Christoph Carnehl & Johannes Schneider, 2021. "A Quest for Knowledge," Papers 2102.13434, arXiv.org, revised Aug 2023.

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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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