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When Spillovers Enhance R&D Incentives

Author

Listed:
  • Rittwik Chatterjee

    (Centre for Studies in Social Sciences)

  • Srobonti Chattopadhyay

    (Vidyasagar College for Women)

  • Tarun Kabiraj

    (Indian Statistical Institute)

Abstract

It is commonly believed that spillover reduces R&D incentives of a firm. This happens because of the appropriability problem. However, some empirical literature shows the possibility of enhanced R&D incentives under spillovers. In the literature this is explained under incomplete information, but we show this theoretically under complete information. We show in particular that in a duopoly there are situations when with no spillovers only one firm invests in R&D, but under spillovers both the firms invest. This occurs when there is complementarity in research and the spillover rate lies in an interval specified by the size of R&D investment.

Suggested Citation

  • Rittwik Chatterjee & Srobonti Chattopadhyay & Tarun Kabiraj, 2019. "When Spillovers Enhance R&D Incentives," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(4), pages 857-868, December.
    • Handle: RePEc:spr:jqecon:v:17:y:2019:i:4:d:10.1007_s40953-019-00161-3
    DOI: 10.1007/s40953-019-00161-3
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    References listed on IDEAS

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    1. Chatterjee, Rittwik & Chattopadhyay, Srobonti & Kabiraj, Tarun, 2018. "Spillovers and R&D Incentive under Incomplete Information," MPRA Paper 85089, University Library of Munich, Germany.
    2. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-1306, December.
    3. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1987. "Appropriating the Returns from Industrial Research and Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3, Specia), pages 783-832.
    4. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
    5. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    6. Sasan Bakhtiari & Robert Breunig, 2018. "The role of spillovers in research and development expenditure in Australian industries," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 27(1), pages 14-38, January.
    7. De Bondt, Raymond, 1997. "Spillovers and innovative activities," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 1-28, February.
    8. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-121, January.
    9. Levin, Richard C, 1988. "Appropriability, R&D Spending, and Technological Performance," American Economic Review, American Economic Association, vol. 78(2), pages 424-428, May.
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    Cited by:

    1. Hurmelinna-Laukkanen, Pia & Yang, Jialei, 2022. "Distinguishing between appropriability and appropriation: A systematic review and a renewed conceptual framing," Research Policy, Elsevier, vol. 51(1).

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