IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v46y2025i2p795-809.html
   My bibliography  Save this article

Centralized Versus Decentralized R&D Within a Multiproduct Monopolistic Firm Under Research Spillovers

Author

Listed:
  • Doori Kim
  • Sang‐Ho Lee
  • Vasileios Zikos

Abstract

This study investigates the R&D organizational structure of a multi‐product monopolistic firm where the central office decides between centralized and decentralized R&D under research spillovers. We demonstrate that decentralized R&D becomes advantageous when the difference between monitoring and coordination costs is relatively high while products are sufficiently differentiated with lower spillovers. We also find that decentralized R&D can yield higher social welfare under moderate spillovers and product differentiation conditions. Our findings underscore the governmental need for a nuanced approach in designing R&D structures, considering the trade‐offs between centralized and decentralized R&D to align producer and consumer incentives.

Suggested Citation

  • Doori Kim & Sang‐Ho Lee & Vasileios Zikos, 2025. "Centralized Versus Decentralized R&D Within a Multiproduct Monopolistic Firm Under Research Spillovers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(2), pages 795-809, March.
  • Handle: RePEc:wly:mgtdec:v:46:y:2025:i:2:p:795-809
    DOI: 10.1002/mde.4404
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.4404
    Download Restriction: no

    File URL: https://libkey.io/10.1002/mde.4404?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Oliver Hart & John Moore, 2005. "On the Design of Hierarchies: Coordination versus Specialization," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 675-702, August.
    2. repec:ner:ucllon:http://discovery.ucl.ac.uk/17678/ is not listed on IDEAS
    3. Kamien, Morton I. & Zang, Israel, 2000. "Meet me halfway: research joint ventures and absorptive capacity," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 995-1012, October.
    4. Jeroen Hinloopen & Jan Vandekerckhove, 2009. "Dynamic efficiency of Cournot and Bertrand competition: input versus output spillovers," Journal of Economics, Springer, vol. 98(2), pages 119-136, November.
    5. Carlos Barcena-Ruiz, Juan & Paz Espinosa, Maria, 1999. "Should multiproduct firms provide divisional or corporate incentives?," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 751-764, July.
    6. David J. Teece, 2003. "Towards an Economic Theory of the Multiproduct Firm," World Scientific Book Chapters, in: Essays In Technology Management And Policy Selected Papers of David J Teece, chapter 15, pages 419-446, World Scientific Publishing Co. Pte. Ltd..
    7. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    8. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    9. Baranes, Edmond & Tropeano, Jean-Philippe, 2003. "Why are technological spillovers spatially bounded? A market orientated approach," Regional Science and Urban Economics, Elsevier, vol. 33(4), pages 445-466, July.
    10. Rosenkranz, Stephanie, 1995. "Innovation and cooperation under vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 1-22, March.
    11. Fauli-Oller, Ramon & Giralt, Magdalena, 1995. "Competition and Cooperation within a Multidivisional Firm," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 77-99, March.
    12. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
    13. Tesoriere, Antonio, 2008. "Endogenous R&D symmetry in linear duopoly with one-way spillovers," Journal of Economic Behavior & Organization, Elsevier, vol. 66(2), pages 213-225, May.
    14. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    15. Baker, George & Gibbons, Robert & Murphy, Kevin J, 1999. "Informal Authority in Organizations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 56-73, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daron Acemoglu & Philippe Aghion & Claire Lelarge & John Van Reenen & Fabrizio Zilibotti, 2007. "Technology, Information, and the Decentralization of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1759-1799.
    2. Nicholas Bloom & Luis Garicano & Raffaella Sadun & John Van Reenen, 2014. "The Distinct Effects of Information Technology and Communication Technology on Firm Organization," Management Science, INFORMS, vol. 60(12), pages 2859-2885, December.
    3. Jeremy C. Stein, 2002. "Information Production and Capital Allocation: Decentralized versus Hierarchical Firms," Journal of Finance, American Finance Association, vol. 57(5), pages 1891-1921, October.
    4. Nicholas Bloom & Raffaella Sadun, 2012. "The Organization of Firms Across Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(4), pages 1663-1705.
    5. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2010. "Does Product Market Competition Lead Firms to Decentralize?," American Economic Review, American Economic Association, vol. 100(2), pages 434-438, May.
    6. Raffaella Sadun & John Van Reenen & Nick Bloom, 2008. "Measuring And Explaining Decentralization Across Firms And Countries," 2008 Meeting Papers 246, Society for Economic Dynamics.
    7. Oliver Hart & John Moore, 2005. "On the Design of Hierarchies: Coordination versus Specialization," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 675-702, August.
    8. Oliver Hart & Bengt Holmstrom, 2010. "A Theory of Firm Scope," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(2), pages 483-513.
    9. Ruble, Richard & Versaevel, Bruno, 2014. "Market shares, R&D agreements, and the EU block exemption," International Review of Law and Economics, Elsevier, vol. 37(C), pages 15-25.
    10. Phillipe Aghion & Nicholas Bloom & John Van Reenen, 2014. "Incomplete Contracts and the Internal Organization of Firms," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(suppl_1), pages 37-63.
    11. Aghion, Philippe & Dewatripont, Mathias & Legros, Patrick & Zingales, Luigi (ed.), 2016. "The Impact of Incomplete Contracts on Economics," OUP Catalogue, Oxford University Press, number 9780199826216, Decembrie.
    12. Filippo Belloc & Gabriel Burdin & Fabio Landini, 2020. "Corporate Hierarchies and Labor Institutions," Department of Economics University of Siena 827, Department of Economics, University of Siena.
    13. Maija Halonen‐Akatwijuka, 2010. "Organizational Design, Technology and the Boundaries of the Firm," Economica, London School of Economics and Political Science, vol. 77(307), pages 544-564, July.
    14. Miguel González‐Maestre, 2000. "Divisionalization and Delegation in Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 321-338, June.
    15. Hugh Mandele & Arjen Witteloostuijn, 2015. "The inevitability and irreversibility of organizational uncontrollability," Computational and Mathematical Organization Theory, Springer, vol. 21(4), pages 380-405, December.
    16. Jeremy C. Stein, 2000. "Information Production and Capital Allocation: Decentralized vs. Hierarchical Firms," NBER Working Papers 7705, National Bureau of Economic Research, Inc.
    17. Patrick Legros & Andrew F. Newman, 2014. "Contracts, Ownership, and Industrial Organization: Past and Future," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(suppl_1), pages 82-117.
    18. Abraham L. Wickelgren, 2005. "Managerial Incentives And The Price Effects Of Mergers," Journal of Industrial Economics, Wiley Blackwell, vol. 53(3), pages 327-353, September.
    19. Beckmann, Michael & Armbruster, Kathrin, 2010. "Business environment, managerial strategies, and the allocation of decision-making authorities in Swiss Firms," Working papers 2010/06, Faculty of Business and Economics - University of Basel.
    20. Luca Lambertini & Giuseppe Pignataro, 2019. "On the social (sub)optimality of divisionalization under product differentiation," Journal of Economics, Springer, vol. 128(3), pages 225-238, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:46:y:2025:i:2:p:795-809. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.