Firms' Location and R&D Cooperation in an Oligopoly with Spillovers

Isabel Mota and Antonio Brandao

CEF.UP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: This paper aims at explaining if firms's decision about location revises when firms cooperate or compete in R&D. For that purpose, it is proposed a three-stage game amongst three firms where each firm decides about location, R&D and output. Firms' decision about location determines a R&D spillover, which is inversely related to the distance between firms. R&D output is assumed to be cost-reducing and exhibit diminishing returns. Cooperation is only allowed in the R&D stage. Our results allow us to conclude that there is a positive relationship between R&D output equilibrium and the distance between firms when firms acts independently. When firms cooperate in R&D, the R&D output for a cooperating firm increases with the degree of information sharing between them, as well as with a reduction of the distance between cooperating firms. Firms' decision about location is also affected by R&D activities: if R&D activities run independently, the clustering of firms only occurs for a convex spillover function; if R&D activities run cooperatively, clustering is always observed if there is an increased information sharing between firms.

Keywords: Location; R&D cooperation; R&D spillovers (search for similar items in EconPapers)
JEL-codes: L13 O31 R30 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2004-10
New Economics Papers: this item is included in nep-com, nep-ino and nep-mic
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:por:cetedp:0404

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