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R&D investments under endogenous cluster formation

R&D investments under endogenous cluster formation
R&D investments under endogenous cluster formation
We provide an innovative theory-based explanation for the positive relationship between firms’ R&D intensity and their degree of R&D cooperation. We show that, when oligopolistic firms decide on long-term R&D investment before forming research clusters among competitors, investment incentives are increased by the desire to become a member of an attractive cluster. This can result in over-investment compared to the welfare optimum and compared to a scenario where research clusters are ex-ante fixed. Thereby, as a theoretical contribution, we fully characterize the equilibria of the unanimity game on cluster formation with heterogeneous firms.
Cluster formation, Oligopoly, R&D
0167-2681
253-283
Dawid, Herbert
dbea80f8-27b6-4487-a95e-6579410c6370
Hellmann, Tim
e03b4edd-3010-4f6d-831e-86e4b3d6cbe0
Dawid, Herbert
dbea80f8-27b6-4487-a95e-6579410c6370
Hellmann, Tim
e03b4edd-3010-4f6d-831e-86e4b3d6cbe0

Dawid, Herbert and Hellmann, Tim (2020) R&D investments under endogenous cluster formation. Journal of Economic Behavior & Organization, 174, 253-283. (doi:10.1016/j.jebo.2020.03.039).

Record type: Article

Abstract

We provide an innovative theory-based explanation for the positive relationship between firms’ R&D intensity and their degree of R&D cooperation. We show that, when oligopolistic firms decide on long-term R&D investment before forming research clusters among competitors, investment incentives are increased by the desire to become a member of an attractive cluster. This can result in over-investment compared to the welfare optimum and compared to a scenario where research clusters are ex-ante fixed. Thereby, as a theoretical contribution, we fully characterize the equilibria of the unanimity game on cluster formation with heterogeneous firms.

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Accepted/In Press date: 30 March 2020
e-pub ahead of print date: 1 May 2020
Published date: June 2020
Keywords: Cluster formation, Oligopoly, R&D

Identifiers

Local EPrints ID: 440701
URI: http://eprints.soton.ac.uk/id/eprint/440701
DOI: doi:10.1016/j.jebo.2020.03.039
ISSN: 0167-2681
PURE UUID: 2eeace42-5590-45c2-b011-d3b7dc1ab087

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Date deposited: 13 May 2020 17:06
Last modified: 17 Mar 2024 05:32

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Contributors

Author: Herbert Dawid
Author: Tim Hellmann

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