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Cooperating firms in inventive and absorptive research

  • Ben Youssef, Slim
  • Breton, Michèle
  • Zaccour, Georges

We consider a duopoly competing in quantity, where firms can invest in both innovative and absorptive R&D to reduce their unit production cost, and where they benefit from free R&D spillovers between them. We analyze the case where firms act non cooperatively and the case where they cooperate by forming a research joint venture. We show that, in both modes of play, there exists a unique symmetric solution. We find that the investment in innovative R&D is always higher than in absorptive R&D. We also find that the value of the learning parameter has almost no impact on innovative R&D, firms profits, consumer's surplus and social welfare. Finally, differences in investment in absorptive research and social welfare under the two regimes are in opposite directions according to the importance of the free spillover.

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File URL: http://mpra.ub.uni-muenchen.de/35326/1/MPRA_paper_35326.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35326.

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Date of creation: Dec 2011
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Handle: RePEc:pra:mprapa:35326
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  1. 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.
  2. Dermot Leahy & J Peter Neary, 2004. "Absorptive Capacity, R&D Spillovers, and Public Policy," Working Papers 200418, School of Economics, University College Dublin.
  3. Vesa Kanniainen & Rune Stenbacka, 2000. "Endogenous Imitation and Implications for Technology Policy," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 156(2), pages 360-, June.
  4. Joanna Poyago-Theotoky, 1999. "A Note on Endogenous Spillovers in a Non-Tournament R & D Duopoly," Review of Industrial Organization, Springer, vol. 15(3), pages 253-262, November.
  5. Rabah Amir & John Wooders, 1998. "Cooperation vs. competition in R&D: The role of stability of equilibrium," Journal of Economics, Springer, vol. 67(1), pages 63-73, February.
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