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Market Structure, Organizational Structure, and R&D Diversity

Author

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  • Farrell, Joseph
  • Gilbert, Richard J.
  • Katz, Michael L.

Abstract

We examine the effects of market structure and the internal organization of firms on equilibrium R&D projects. We compare a monopolist’s choice of R&D portfolio to that of a welfare maximizer. We next show that Sah and Stiglitz’s finding that the market portfolio of R&D is independent of the number of firms under Bertrand competition extends to neither Cournot oligopoly nor a cartel. We also show that the ability of firms to pre-empt R&D by rivals along particular research paths can lead to socially excessive R&D diversification. Lastly, using Sah and Stiglitz’s definition of hierarchy, we establish conditions under which larger hierarchies invest in smaller portfolios.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Farrell, Joseph & Gilbert, Richard J. & Katz, Michael L., 2002. "Market Structure, Organizational Structure, and R&D Diversity," Department of Economics, Working Paper Series qt2pn5t5nj, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    • Handle: RePEc:cdl:econwp:qt2pn5t5nj
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    Cited by:

    1. Stefano Comino & Fabio M. Manenti, 2022. "Patent portfolios and firms’ technological choices," Journal of Economics, Springer, vol. 137(2), pages 97-120, October.

    More about this item

    Keywords

    internal organization; market power; research and development; Business; Social and Behavioral Sciences;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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