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Technological Spillovers, Product Market Rivalry and R&D Investment

Author

Listed:
  • Thomas Grebel

    (Technische Universität Ilmenau, Germany)

  • Lionel Nesta

    (Université Côte d'Azur
    GREDEG CNRS
    OFCE Sciences Po.
    SKEMA Business School)

Abstract

We investigate the determinants of the sign of R&D reaction functions of two rival firms. Using a two-stage Cournot competition game, we show that this sign depends on four types of environments in terms of product rivalry and technology spillovers. We test the predictions of the model on the world's largest manufacturing corporations. Assuming that firms make R&D investments based on the R&D effort of the representative rival company, we develop a dynamic panel data model that accounts for the endogeneity of the decision of the rival firm. Empirical results corroborate the validity of the theoretical model.

Suggested Citation

  • Thomas Grebel & Lionel Nesta, 2017. "Technological Spillovers, Product Market Rivalry and R&D Investment," GREDEG Working Papers 2017-34, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  • Handle: RePEc:gre:wpaper:2017-34
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    File URL: http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2017-34.pdf
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    References listed on IDEAS

    as
    1. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    2. Baum, Christopher F. & Caglayan, Mustafa & Stephan, Andreas & Talavera, Oleksandr, 2008. "Uncertainty determinants of corporate liquidity," Economic Modelling, Elsevier, vol. 25(5), pages 833-849, September.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ludovic Dibiaggio & Benjamin Montmartin & Lionel Nesta, 2018. "Regional alignement and productivity growth," Sciences Po publications 25, Sciences Po.
    2. Ludovic Dibiaggio & Benjamin Montmartin & Lionel Nesta, 2018. "Regional Alignment and Productivity Growth," GREDEG Working Papers 2018-18, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
    3. Benjamin Montmartin & Ludovic Dibiaggio & Lionel Nesta, 2018. "Regional Alignment and Productivity Growth," Working Papers halshs-01948337, HAL.

    More about this item

    Keywords

    Process R&D; Spillovers; Product substitution; Reaction function; GMM;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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