Centralized Versus Decentralized R&D Within a Multiproduct Monopolistic Firm Under Research Spillovers

Doori Kim, Sang‐Ho Lee and Vasileios Zikos

Managerial and Decision Economics, 2025, vol. 46, issue 2, 795-809

Abstract: This study investigates the R&D organizational structure of a multi‐product monopolistic firm where the central office decides between centralized and decentralized R&D under research spillovers. We demonstrate that decentralized R&D becomes advantageous when the difference between monitoring and coordination costs is relatively high while products are sufficiently differentiated with lower spillovers. We also find that decentralized R&D can yield higher social welfare under moderate spillovers and product differentiation conditions. Our findings underscore the governmental need for a nuanced approach in designing R&D structures, considering the trade‐offs between centralized and decentralized R&D to align producer and consumer incentives.

Date: 2025
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https://doi.org/10.1002/mde.4404

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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:46:y:2025:i:2:p:795-809

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