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The strategic timing of R&D agreements

Author

Listed:
  • Marco Marini

    () (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")

  • Maria Luisa Petit

    () (Department of Computer and System Sciences "Antonio Ruberti", Università di Roma "La Sapienza")

  • Roberta Sestini

    () (Department of Computer and System Sciences "Antonio Ruberti", Università di Roma "La Sapienza")

Abstract

We present a model of endogenous formation of R&D agreements among firms in which also the timing of R&D investment is made endogenous. The purpose is to bridge two usually separate streams of literature, the noncooperative formation of R&D alliances and the endogenous timing literature. Our approach allows to consider the formation of R&D agreements over time. It is shown that, when both R&D spillovers and investment costs are sufficiently low, firms may find difficult to maintain a stable R&D agreement due to the strong incentive to invest noncooperatively as leaders. In such a case, to be stable a R&D agreement requires that the joint investment occurs at the initial stage, avoiding any delay. When instead R&D spillover rates are sufficiently high, the cooperation in R&D constitutes a profitable option, although firms also possess the incentive to sequence their investment over time. Finally, when spillovers are asymmetric and the knowledge leaks mainly from the leader to the follower, to invest as follower becomes extremely profitable, making R&D alliances hard to sustain unless firms strategically delay their joint investment in R&D.

Suggested Citation

  • Marco Marini & Maria Luisa Petit & Roberta Sestini, 2011. "The strategic timing of R&D agreements," Working Papers 1104, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2011.
  • Handle: RePEc:urb:wpaper:11_04
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    File URL: http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_11_04.pdf
    File Function: First version, 2011
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    References listed on IDEAS

    as
    1. van Damme, Eric & Hurkens, Sjaak, 2004. "Endogenous price leadership," Games and Economic Behavior, Elsevier, vol. 47(2), pages 404-420, May.
    2. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-1064, July.
    3. von Stengel, Bernhard, 2010. "Follower payoffs in symmetric duopoly games," Games and Economic Behavior, Elsevier, vol. 69(2), pages 512-516, July.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Sergio Currarini & Marco A. Marini, 2015. "Coalitional Approaches to Collusive Agreements in Oligopoly Games," Manchester School, University of Manchester, vol. 83(3), pages 253-287, June.

    More about this item

    Keywords

    R&D investment; Spillovers; Endogenous Timing.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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