Competition and private R&D investment

Thomas Grebel and Lionel Nesta

PLOS ONE, 2020, vol. 15, issue 5, 1-26

Abstract: We investigate the determinants of the sign of Research and Development reaction functions of rival firms. Using a two-stage n-firm Cournot competition game, we show that this sign depends on four types of environments in terms of product rivalry and technology spillovers. We test the predictions of the model on the world’s largest manufacturing corporations. Assuming that firms make R&D investments based on the R&D effort of the representative rival company, we develop a dynamic panel data model that accounts for the endogeneity of the decision of the rival firm. Empirical results thoroughly corroborate the validity of the theoretical model.

Date: 2020
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Working Paper: Competition and private R&D investment (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0232119

DOI: 10.1371/journal.pone.0232119

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