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Endogenous Technology Sharing in R&D Intensive Industries

  • Clark, Derek J.
  • Sand, Jan Yngve

This paper analyses the endogenous formation of technology sharing coalitions with asymmetric firms. Coalition partners produce complementary technology advancements, although each firm determines its R&D investment level non-cooperatively and there is no co-operation in the product market. We show that the equilibrium coalition outcome is either one between the two most efficient firms, or a coalition with all three firms. The two-firm coalition is the preferred outcome of a welfare maximising authority if ex ante marginal cost is sufficiently high, and the three-firm coalition is preferred otherwise. Furthermore, we show that the equilibrium outcomes result in the lowest total R&D investment of all possible outcomes. Aircraft engine manufacturing provides a case study, and indicates the importance of anti-trust issues as an addition to the theory.

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Paper provided by Kiel Institute for the World Economy (IfW) in its series Economics Discussion Papers with number 2009-28.

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Date of creation: 2009
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Handle: RePEc:zbw:ifwedp:7592
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