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The Efficiency and Evolution of R&D Networks

  • Michael D. König

    ()

    (Chair of Systems Design, ETH Zurich, Switzerland)

  • S. Battiston

    ()

    (Chair of Systems Design, ETH Zurich, Switzerland)

  • M. Napoletano

    (Chair of Systems Design, ETH Zurich and Observatoire Français des Conjonctures Economiques, Department for Research on Innovation and Competition, Valbonne, France)

  • F. Schweitzer

    (Chair of Systems Design, ETH Zurich, Switzerland)

This work introduces a new model to investigate the efficiency and evolution of networks of firms exchanging knowledge in R&D partnerships. We first examine the efficiency of a given network structure in terms of the maximization of total profits in the industry. We show that the efficient network structure depends on the marginal cost of collaboration. When the marginal cost is low, the complete graph is efficient. However, a high marginal cost implies that the efficient network is sparser and has a core-periphery structure. Next, we examine the evolution of the network struc- ture when the decision on collaborating partners is decentralized. We show the existence of mul- tiple equilibrium structures which are in general inefficient. This is due to (i) the path dependent character of the partner selection process, (ii) the presence of knowledge externalities and (iii) the presence of severance costs involved in link deletion. Finally, we study the properties of the emerg- ing equilibrium networks and we show that they are coherent with the stylized facts of R&D net- works.

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File URL: http://www.cer.ethz.ch/research/wp_08_95.pdf
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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 08/95.

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Length: 60 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:eth:wpswif:08-95
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