R&D investments under endogenous cluster formation

Herbert Dawid and Tim Hellmann

Journal of Economic Behavior & Organization, 2020, vol. 174, issue C, 253-283

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.

Keywords: R&D; Cluster formation; Oligopoly (search for similar items in EconPapers)
JEL-codes: C71 C72 L13 O30 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:174:y:2020:i:c:p:253-283

DOI: 10.1016/j.jebo.2020.03.039

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