Equilibrium research joint ventures

Research output: Book Chapters | Papers in Conference ProceedingsBook ChapterResearchpeer-review

Abstract

Research joint ventures (RJVs) avoid duplication of R and D costs and facilitate knowledge diffusion. However, sharing R and D output intensifies post-innovation market competition and hence hampers firms' incentive to join an RJV. In this paper, RJV formation is modeled as a noncooperative sequential game, as in Bloch (1995, “Endogenous structures of association in oligopoly”, RAND Journal of Economics 26, 537–556). I show that in equilibrium a unique RJV exists, and it comprises of only a subset of the firms in the industry unless R and D cost is low. Moreover, the equilibrium RJV is larger than the size that maximizes the profit per member firm but smaller than the socially optimal size. When firms initially have different marginal costs, various RJV structures can emerge in equilibrium. For some parameter values of the model, large (low-cost) firms join hands in R and D, leaving small (high-cost) firms as outsiders. For other parameter values, a group of large firms invite small firms, instead of other large firms, to form an RJV.
Original languageEnglish
Title of host publicationThe economics of innovation: Incentives, cooperation, and RandD policy
PublisherEmerald
Pages143-156
Number of pages14
ISBN (Print)9780444532558
DOIs
Publication statusPublished - 1 Jan 2008

Fingerprint

Research joint ventures
Costs
Join
Small firms
Large firms
Innovation
Sequential game
Outsider
Marginal cost
Incentives
Economics
Industry
Knowledge diffusion
Oligopoly
Profit
Market competition

Cite this

LIN, P. (2008). Equilibrium research joint ventures. In The economics of innovation: Incentives, cooperation, and RandD policy (pp. 143-156). Emerald. https://doi.org/10.1016/S0573-8555(08)00208-3
LIN, Ping. / Equilibrium research joint ventures. The economics of innovation: Incentives, cooperation, and RandD policy. Emerald, 2008. pp. 143-156
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LIN, P 2008, Equilibrium research joint ventures. in The economics of innovation: Incentives, cooperation, and RandD policy. Emerald, pp. 143-156. https://doi.org/10.1016/S0573-8555(08)00208-3

Equilibrium research joint ventures. / LIN, Ping.

The economics of innovation: Incentives, cooperation, and RandD policy. Emerald, 2008. p. 143-156.

Research output: Book Chapters | Papers in Conference ProceedingsBook ChapterResearchpeer-review

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LIN P. Equilibrium research joint ventures. In The economics of innovation: Incentives, cooperation, and RandD policy. Emerald. 2008. p. 143-156 https://doi.org/10.1016/S0573-8555(08)00208-3