Cooperating firms in inventive and absorptive research
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.
|Date of creation:||Dec 2011|
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- Leahy, Dermot & Neary, J. Peter, 2007.
"Absorptive capacity, R&D spillovers, and public policy,"
International Journal of Industrial Organization,
Elsevier, vol. 25(5), pages 1089-1108, October.
- Dermot Leahy & J. Peter Neary, 2004. "Absorptive capacity, R&D spillovers, and public policy," Working Papers 200418, School of Economics, University College Dublin.
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- Joanna Poyago-Theotoky, 1999. "A Note on Endogenous Spillovers in a Non-Tournament R & D Duopoly," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(3), pages 253-262, November.
- 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.
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