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Are You the Right Partner ? R&D Agreement as a Screening Device

Chiara Conti () and Marco Marini ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper focusseses on the strategic use of firms' R&D agreements to overcome R&D inefficiencies in presence of asymmetric information and research spillovers. We introduce a duopoly game where initially one firm is not fully informed on its rival's R&D productivity. We show that, without R&D agreements, the usual underinvestment problem can be exacerbated by the presence of asymmetric information. However, by proposing a R&D agreement, the uninformed firm may not only gain from the internalization of R&D investment spillovers, but also use it strategically as a screening device to assess the true type of its rival. According to the model, firms are more likely to pursuit R&D agreements in presence of similar productivity and less when their productivity gap is high. This is consistent with the empirical findings highlighting the importance of firms' similarities for R&D collaborations.

Keywords: Asymmetric Information; Screening; Duopoly; R&D investments; R&D Spillovers; R&D agreements. (search for similar items in EconPapers)
JEL-codes: D43 D8 D82 L00 L13 L19 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-ino and nep-mic
Date: 2017-07-27
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Journal Article: Are you the right partner? R&D agreement as a screening device (2019) Downloads
Working Paper: Are You the Right Partner ? R&D Agreement as a Screening Device (2017) Downloads
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