We develop a model of strategic networks that captures two distinctive features of interfirm collaboration: bilateral agreements and nonexclusive relationships. Our analysis highlights the relationship between market competition, firms' incentives to invest in R&D, and the architecture of collaboration networks. In the absence of firm rivalry, the complete network, inhere each firm collaborates with all others, is uniquely stable, industry-profit maximizing, and efficient. By contrast, under strong market rivalry the complete network is stable, but intermediate levels of collaboration and asymmetric networks are more attractive from a collective viewpoint. This suggests that competing firms may have excessive incentives to form collaborative links. Copyright 2001 by the RAND Corporation.
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Volume (Year): 32 (2001)
Issue (Month): 4 (Winter)
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