R&D Cooperation in Regular Networks with Endogenous Absorptive Capacity

Correani Luca (), Garofalo Giuseppe and Pugliesi Silvia
Additional contact information
Correani Luca: Department of Economics and Management, Tuscia University, Viterbo, Italy
Garofalo Giuseppe: Department of Economics and Management, Tuscia University, Viterbo, Italy
Pugliesi Silvia: Department of Economics and Management, Tuscia University, Viterbo, Italy

Review of Network Economics, 2014, vol. 13, issue 2, 191-226

Abstract: In this paper we analyze how firms’ R&D investment decisions, firms’ profits and social welfare are affected by absorptive capacity; that is, the ability of a firm to learn from other collaborating firms. The model developed is a strategic regular network where firms have the opportunity to form pair-wise collaborative links with other firms and then compete à la Cournot. Different to the existing literature, we find that firms’ R&D efforts could increase or decrease with the degree of the network, depending on the level of absorptive capacity, the market size and the network dimension. In particular, in the case of small market size and low learning effect, the connection between firms drives up research investments. Moreover, if absorptive capacity is sufficiently low, the research collaboration between firms turns out not to be desirable from a private point of view while, in line with the existing literature, social efficiency requires a complete or intermediate level of collaborative activity. We also show that the complete network is pair-wise stable and socially optimal for an intermediate level of spillover intensity, while the empty network maximizes firms’ profits when absorptive capacity is small, yet it is not pair-wise stable.

Keywords: absorptive capacity; oligopoly; R&D network (search for similar items in EconPapers)
JEL-codes: L13 O31 O32 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/rne-2014-0007 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:rneart:v:13:y:2014:i:2:p:191-226:n:1003

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/rne/html

DOI: 10.1515/rne-2014-0007

Access Statistics for this article

Review of Network Economics is currently edited by Lukasz Grzybowski

More articles in Review of Network Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().