Effects of One-Way Spillovers on Market Shares, Industry Price, Welfare, and R & D Cooperation

With one-way spillovers, the standard symmetric two-period R&D model leads to an asymmetric equilibrium only, with endogenous innovator and imitator. We show how R&D decisions and measures of firm heterogeneity - market shares, R&D shares, and profits - depend on spillovers and on R&D costs. While a joint lab always improves on consumer welfare, it yields higher profits, cost reductions and social welfare only under extra assumptions, beyond those required with multi-directional spillovers. Finally, the novel issue of optimal R&D cartels (with an endogenous spillover parameter) is addressed. In particular, the latter can be zero under some conditions.

[1]  David B. Audretsch,et al.  Patents as a Measure of Innovative Activity , 1989 .

[2]  K. Suzumura.  Cooperative and noncooperative R&D in an oligopoly with spillovers , 1992 .

[3]  R. Isaac,et al.  Appropriability and Market Structure in a Stochastic Invention Model , 1988 .

[4]  L. Röller,et al.  On the heterogeneity of firms , 1996 .

[5]  C. Shapiro,et al.  R&D Rivalry with Licensing or Imitation , 1987 .

[6]  Daniel F. Spulber.  Editorial: Do Firms Differ? , 1993 .

[7]  Z. Griliches.  Patent Statistics as Economic Indicators: a Survey , 1990 .

[8]  S. Lippman,et al.  Barriers to Imitation and the Incentive to Innovate , 1995 .

[9]  G. Shaffer,et al.  Optimal asymmetric strategies in research joint ventures , 1998 .

[10]  A. Jacquemin,et al.  Cooperative and Noncooperative R&D in Duopoly with Spillovers , 1988 .

[11]  M. Spence.  Cost Reduction, Competition and Industry Performance , 1984 .

[12]  Marcel Boyer,et al.  Capacity Commitment Versus Flexibility: The Technological Choice Nexus in a Strategic Context , 1995 .

[13]  Bruno Cassiman,et al.  The degree of spillovers and the number of rivals for maximum effective R &D , 1992 .

[14]  J. Wooders,et al.  Cooperation vs. competition in R&D: The role of stability of equilibrium , 1998 .

[15]  J. Brander,et al.  International R&D Rivalry and Industrial Strategy , 1983 .

[16]  Benjamin E. Hermalin,et al.  Heterogeneity in Organizational Form: Why Otherwise Identical Firms Choose Different Incentives for Their Managers , 1992 .

[17]  Michael L. Katz,et al.  An Analysis of Cooperative Research and Development , 1986 .

[18]  G. Shaffer,et al.  Optimal Asymmetric Strategies in Research Joint Ventures: A Comment on the Literature , 1992 .

[19]  P. Dasgupta,et al.  Industrial Structure and the Nature of Innovative Activity , 1980 .

[20]  Jay Pil Choi,et al.  Cooperative R&D with product market competition , 1993 .

[21]  Rabah Amir,et al.  One-Way Spillovers, Endogenous Innovator/Imitator Roles, and Research Joint Ventures , 2000, Games Econ. Behav..

[22]  E. Muller,et al.  Research Joint Ventures and R&D Cartels , 1992 .

[23]  R. Rumelt,et al.  Inertia and Transformation , 1995 .

[24]  Frederic M. Scherer,et al.  The propensity to patent , 1983 .

[25]  Stochastic innovation and product market organization , 1992 .

[26]  Technology policy and the organization of R&D , 1998 .

[27]  C. Shapiro,et al.  Optimal Patent Length and Breadth , 1990 .

[28]  Jerry R. Green,et al.  On the Division of Profit in Sequential Innovation , 1995 .