 A model of R&D with internal and external sources of knowledge as substitutesMário Alexandre Patrício Martins da Silva ()
FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto Abstract: We explore how substitutability between internal and external R&D influences the business conduct of innovative firms with regard to R&D approaches and investments in competitive and cooperative innovation games. To this purpose, we develop a duopoly model which incorporates the assumption of substitutability arising between internal and external R&D due to diseconomies of scope in firms using different innovation mechanisms. Most results of our model are qualitatively different from those of earlier models of R&D with exogenous spillovers or endogenous absorptive capacity determined by R&D approaches. We find that firms are likely to adopt the same research approach regardless of whether they cooperate or compete in R&D. The two versions of our model make the same prediction concerning the specificity of the firm’s R&D agenda. The cooperative equilibrium entails always either a higher or a lower level of individual R&D output relative to the non-cooperative case. Developing innovations exclusively in-house provides the advantage of higher efficiency of R&D investments and induces higher technological progress than opening some of one’s knowledge to other firms and tapping into external sources of knowledge. We find a tension between the knowledge disclosures resulted from the R&D generality of a firm’s research approach and the protections of innovation returns facilitated by the R&D specificity of its research approach that arises as a paradox for firms. The finding of a positive association between the choice of a firm to be connected with the R&D environment and the appropriability of its innovation returns is understood to be consistent with the empirical result of a paradox of openness that firms open to external sources of innovation face. We expect that the probability of cooperation in R&D is increasing in the strength of legal intellectual protection. Firms that are more effective in strategically protecting their valuable knowledge through the choice of research approaches are more inclined to start a research joint venture. Keywords: Substitutability; Internal and external knowledge sources; Diseconomies of scope; Absorptive capacity; Openness; Research joint ventures. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:620 Access Statistics for this paper More papers in FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto Contact information at EDIRC. |
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