IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Joint ventures in patent contests with spillovers and the role of strategic budgeting

  • Jost, Peter-J.
Registered author(s):

    We consider an R&D contest between n firms in the presence of external spillovers. Our analysis focuses on the effects of these spillovers on joint venture activities between firms. In particular, we are interested in how different budget responsibilities within the research joint venture (RJV) affect profits of firms taking part in the joint venture and profits of their non-cooperating rival firms. Three arrangements for RJVs are analyzed: First, cooperation, in which the firms participating in the joint venture completely share the research they create in the innovation process and each firm has a sovereign budget responsibility. Second, a collusive arrangement in which the participating firms not only share their research but have joint budget responsibilities in the sense that they make all strategic choices cooperatively and maximize joint profits. Third, a hierarchical form, in which the cooperating firms establish joint headquarters which have strategic budget responsibility in the sense that it can strategically subsidize R&D efforts of its member firms so as to maximize overall RJV profits. We show that the first two arrangements can be mimiced in the hierarchical structure and that a hierarchical structure is optimal if it completely subsidizes its members’ R&D activities. In this case all rival firms are driven out of the contest.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0148619511000397
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Journal of Economics and Business.

    Volume (Year): 63 (2011)
    Issue (Month): 6 ()
    Pages: 605-637

    as
    in new window

    Handle: RePEc:eee:jebusi:v:63:y:2011:i:6:p:605-637
    Contact details of provider: Web page: http://www.elsevier.com/locate/jeconbus

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Krakel, Matthias & Sliwka, Dirk, 2006. "Strategic delegation and mergers in oligopolistic contests," Journal of Economics and Business, Elsevier, vol. 58(2), pages 119-136.
    2. Kyle Bagwell & Robert W. Staiger, 1996. "Strategic Export Subsidies and Reciprocal Trade Agreements: The Natural Monopoly Case," Discussion Papers 1156, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Matthias Kräkel, 2002. "Delegation and strategic incentives for managers in contests," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(8), pages 461-470.
    4. Baik, Kyung Hwan & Kim, In-Gyu, 1997. "Delegation in contests," European Journal of Political Economy, Elsevier, vol. 13(2), pages 281-298, May.
    5. Ruff, Larry E., 1969. "Research and technological progress in a cournot economy," Journal of Economic Theory, Elsevier, vol. 1(4), pages 397-415, December.
    6. Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    7. Amir, Rabah & Evstigneev, Igor & Wooders, John, 2003. "Noncooperative versus cooperative R&D with endogenous spillover rates," Games and Economic Behavior, Elsevier, vol. 42(2), pages 183-207, February.
    8. Patrick Greenlee, 2005. "Endogenous Formation Of Competitive Research Sharing Joint Ventures," Journal of Industrial Economics, Wiley Blackwell, vol. 53(3), pages 355-391, 09.
    9. Huck, Steffen & Konrad, Kai A. & Müller, Wieland, 2000. "Merger in contests," SFB 373 Discussion Papers 2000,3, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    10. W. Salant, Stephen & Shaffer, Greg, 1998. "Optimal asymmetric strategies in research joint ventures," International Journal of Industrial Organization, Elsevier, vol. 16(2), pages 195-208, March.
    11. Matthias Kräkel, 2005. "Strategic delegation in oligopolistic tournaments," Review of Economic Design, Springer, vol. 9(4), pages 377-396, December.
    12. Yi, Sang-Seung & Shin, Hyukseung, 2000. "Endogenous formation of research coalitions with spillovers," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 229-256, February.
    13. María José Gil Moltó & Nikolaos Georgantzís & Vicente Orts, 2004. "Cooperative R&D with Endogenous Technology Differentiation," Industrial Organization 0401009, EconWPA.
    14. Stanley M. Besen & Joseph Farrell, 1994. "Choosing How to Compete: Strategies and Tactics in Standardization," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 117-131, Spring.
    15. Szidarovszky, Ferenc & Okuguchi, Koji, 1997. "On the Existence and Uniqueness of Pure Nash Equilibrium in Rent-Seeking Games," Games and Economic Behavior, Elsevier, vol. 18(1), pages 135-140, January.
    16. Schwartz, Marius & Thompson, Earl A, 1986. "Divisionalization and Entry Deterrence," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 307-21, May.
    17. Sumit Joshi, 2000. "Networks of Collaboration in Oligopoly," Econometric Society World Congress 2000 Contributed Papers 0623, Econometric Society.
    18. Peter-J. Jost & Claus van der Velden, 2006. "Mergers in Patent Contest Models with Synergies and Spillovers," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 58(2), pages 157-179, April.
    19. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
    20. Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, vol. 77(5), pages 891-98, December.
    21. Beath, John & Poyago-Theotoky, Joanna & Ulph, David, 1998. "Organization Design and Information-Sharing in a Research Joint Venture with Spillovers," Bulletin of Economic Research, Wiley Blackwell, vol. 50(1), pages 47-59, January.
    22. Baye, Michael R. & Hoppe, Heidrun C., 2003. "The strategic equivalence of rent-seeking, innovation, and patent-race games," Games and Economic Behavior, Elsevier, vol. 44(2), pages 217-226, August.
    23. Hagedoorn, John & Schakenraad, Jos, 1992. "Leading companies and networks of strategic alliances in information technologies," Research Policy, Elsevier, vol. 21(2), pages 163-190, April.
    24. Goyal, S. & Joshi, S., 2000. "Networks of Collaboration in Oligopoly," Econometric Institute Research Papers EI 9952-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    25. Sen, Anindya, 1993. "Entry and managerial incentives," International Journal of Industrial Organization, Elsevier, vol. 11(1), pages 123-137, March.
    26. Shaoping Zhao, 1999. "Joint ventures for entry deterrence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(1), pages 25-35.
    27. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
    28. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
    29. Gal-Or, Esther, 1993. "Internal organization and managerial compensation in oligopoly," International Journal of Industrial Organization, Elsevier, vol. 11(2), pages 157-183, June.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:jebusi:v:63:y:2011:i:6:p:605-637. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.