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R&D Networks

Author

Listed:
  • Goyal, S.
  • Moraga-Gonzalez, J.L.

Abstract

Many markets are characterized by a high level of inter-firm collaboration in R&D activity. This paper develops a simple model of strategic networks which captures two distinctive features of such collaboration activity: bilateral agreements and non-exclusive relationships. We study the effects of collaborations on individual R&D effort, cost reduction, and market performance. We then examine the incentives of firms to form collaborative links and the architecture of strategically stable networks. Our analysis highlights the interaction between market competition and R&D network structure. We find that if firms are Cournot competitors then individual R&D effort is declining in the level of collaborative activity. However, cost reduction and social welfare are maximized under an intermediate level of collaboration. In some cases, firms can gain market power, and even induce exit of rival firms, by forming suitable collaboration agreements. Moreover, under certain circumstances, such asymmetric collaboration networks are also strategically stable. By contrast, if firms operate in independent markets then individual R&D effort is increasing in the level of collaborative activity. Cost reduction and social welfare are maximized under the complete network, which is also strategically stable.

Suggested Citation

  • Goyal, S. & Moraga-Gonzalez, J.L., 2000. "R&D Networks," Econometric Institute Research Papers EI 2000-26A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  • Handle: RePEc:ems:eureir:6945
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    Cited by:

    1. Itay P. Fainmesser, 2012. "Community Structure and Market Outcomes: A Repeated Games-in-Networks Approach," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 32-69, February.
    2. Coralio Ballester & Antoni Calvó-Armengol & Yves Zenou, 2006. "Who's Who in Networks. Wanted: The Key Player," Econometrica, Econometric Society, vol. 74(5), pages 1403-1417, September.
    3. Mauro Napoletano & Stefano Battiston & Michael D König & Frank Schweitzer, 2008. "The efficiency and evolution of R&D Networks," Sciences Po publications 2008-31, Sciences Po.
    4. Rodrigo J. Harrison & Roberto Munoz, 2003. "Stability and Equilibrium Selection in a Link Formation Game," Game Theory and Information 0306004, University Library of Munich, Germany.
    5. Currarini, Sergio & Marchiori, Carmen & Tavoni, Alessandro, 2016. "Network economics and the environment: insights and perspectives," LSE Research Online Documents on Economics 63951, London School of Economics and Political Science, LSE Library.
    6. Albert Banal-Estañol & Ines Macho-Stadler & Jo Seldeslachts, 2003. "Mergers, Investment Decisions and Internal Organisation," CESifo Working Paper Series 944, CESifo Group Munich.
    7. Huasheng Song & Vincent Vannetelbosch, 2007. "International R&D Collaboration Networks," Manchester School, University of Manchester, vol. 75(6), pages 742-766, December.
    8. Michael Kosfeld, "undated". "Network Experiments," IEW - Working Papers 152, Institute for Empirical Research in Economics - University of Zurich.
    9. Mohammad Arzaghi & J. Vernon Henderson, 2008. "Networking off Madison Avenue," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1011-1038.
    10. Aydogan, Neslihan & Lyon, Thomas P., 2004. "Spatial proximity and complementarities in the trading of tacit knowledge," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1115-1135, November.
    11. Bloch, Francis & Dutta, Bhaskar, 2009. "Communication networks with endogenous link strength," Games and Economic Behavior, Elsevier, vol. 66(1), pages 39-56, May.
    12. Andrea Galeotti & Sanjeev Goyal & Matthew O. Jackson & Fernando Vega-Redondo & Leeat Yariv, 2010. "Network Games," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 218-244.
    13. Dutta, Bhaskar & Ghosal, Sayantan & Ray, Debraj, 2005. "Farsighted network formation," Journal of Economic Theory, Elsevier, vol. 122(2), pages 143-164, June.
    14. Gary H. Jefferson & Zhong Kaifeng, 2002. "An Investigation of Firm-Level R&D Capabilities in East Asia," William Davidson Institute Working Papers Series 583, William Davidson Institute at the University of Michigan.
    15. Mauleon, Ana & Sempere-Monerris, Jose J. & Vannetelbosch, Vincent J., 2011. "Networks of manufacturers and retailers," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 351-367, March.
    16. Lorenzo Zirulia, 2005. "R&D Networks with Heterogenous Firms," KITeS Working Papers 167, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised May 2005.
    17. MAULEON, Ana & SEMPERE-MONERRIS, José & VANNETELBOSCH, Vincent J., 2004. "R&D networks among unionized firms," CORE Discussion Papers 2004071, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

    More about this item

    Keywords

    networks; research and development; strategic alliances;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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