Market Structure, Organizational Structure, and R&D Diversity

Joseph Farrell (), Richard J. Gilbert () and Michael L. Katz ()

Industrial Organization from EconWPA

Abstract: We examine the effects of market structure and the internal organization of firms on equilibrium R&D projects. We compare a monopolist's choice of R&D portfolio to that of a welfare maximizer. We next show that Sah and Stiglitz's finding that the market portfolio of R&D is independent of the number of firms under Bertrand competition extends to neither Cournot oligopoly nor a cartel. We also show that the ability of firms to pre-empt R&D by rivals along particular research paths can lead to socially excessive R&D diversification. Lastly, using Sah and Stiglitz's definition of hierarchy, we establish conditions under which larger hierarchies invest in smaller portfolios.

JEL-codes: L1 L12 O31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
Date: 2003-03-19
Note: 32 pages, Acrobat .pdf
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Related works:
Working Paper: Market Structure, Organizational Structure, and R&D Diversity (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0303006

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