Cooperative R&D Under Uncertainty with Free Entry

38 Pages Posted: 22 Jul 2009

See all articles by Nisvan Erkal

Nisvan Erkal

University of Melbourne - Faculty of Business and Economics

Daniel Piccinin

Brick Court Chambers

Date Written: August 31, 2008

Abstract

This paper analyzes the effects of cooperative R&D arrangements in a model with stochastic R&D and output spillovers. Our main innovation is to allow for free entry in both the R&D race and product market. Moreover, in contrast with the literature, we assume that cooperative R&D arrangements do not have to include all the firms in the industry. We show that sharing of research outcomes is a necessary condition for the profitability of cooperative R&D arrangements with free entry. The profitability of RJV cartels depends on their size. Subsidies may be desirable in cases of larger RJVs since they are the ones which are less likely to be profitable.

Keywords: Cooperative R&D, research joint ventures, free entry, uncertain R&D, technology spillovers

JEL Classification: L1, L4, O3

Suggested Citation

Erkal, Nisvan and Piccinin, Daniel, Cooperative R&D Under Uncertainty with Free Entry (August 31, 2008). International Journal of Industrial Organization, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1434285

Nisvan Erkal (Contact Author)

University of Melbourne - Faculty of Business and Economics ( email )

Victoria, 3010
Australia
+61 3 8344 3307 (Phone)
+61 3 8344 6899 (Fax)

HOME PAGE: http://www.nisvanerkal.net

Daniel Piccinin

Brick Court Chambers ( email )

7 - 8 Essex St.
London, WC2R 3LD
United Kingdom

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