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Hybrid R&D

  • Sanjeev Goyal
  • José Luis Moraga-González
  • Alexander Konovalov

We develop a model of R&D collaboration in which individual firms carry out in-house research on core activities and undertake bilateral joint projects on non-core activities with other firms. We develop conditions on the profit functions of the firm under which R&D investments in different projects of a firm are complementary. We show that this condition is met by standard price and quantity setting oligopoly models. We then study the relation between the number of joint projects and investments and profits. In this context, we identify a second aspect of complementarity: Equilibrium investments in in-house as well as in each joint project are increasing in the number of projects. However, we find that an increase in number of joint projects of all firms lowers collective profits, suggesting the presence of excessive incentives for conducting research. (JEL: L13, L14, L22, O31, O32) (c) 2008 by the European Economic Association.

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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 6 (2008)
Issue (Month): 6 (December)
Pages: 1309-1338

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Handle: RePEc:tpr:jeurec:v:6:y:2008:i:6:p:1309-1338
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  1. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  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 1293-306, December.
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