English, Article, Journal or magazine article edition: R&D Delegation in a Duopoly with Spillovers Bruno Versaevel; Désiré Vencatachellum

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Bookmark: http://trove.nla.gov.au/version/200526
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • R&​D Delegation in a Duopoly with Spillovers
Author
  • Bruno Versaevel
  • Désiré Vencatachellum
Physical Description
  • preprint
Notes
  • There is evidence that competing firms delegate R&​D to the same independent profit-maximizing laboratory. We draw on this stylized fact to construct a model where two firms in the same industry offer transfer payments in exchange of user-specific R&​D services from a common laboratory. Inter-firm and within-laboratory externalities affect the intensity of competition among delegating firms on the intermediate market for technology. Whether competition is relatively soft or tight is reflected by each firm’s transfer payment offers to the laboratory. This in turn determines the laboratory’s capacity to earn profits, R&​D outcomes, delegating firms’ profits, and social welfare. We compare the delegated R&​D game to two other one where firms (i) cooperatively conduct in-house R&​D, and (ii) non-cooperatively choose in-house R&​D. The delegated R&​D game Pareto dominates the other two games, and the laboratory earns positive profits, only if within-laboratory R&​D services are sufficiently complementary, but inter-firm spillovers are sufficiently low. We find no room for policy intervention, because the privately profitable decision to delegate R&​D, when the laboratory participates, always benefits consumers.
  • Research and development, externalities, common agency.
  • RePEc:iea:carech:0501
  • RePEc:hal:journl:halshs-00142520_v1
  • There is evidence that competing firms delegate R&​D to the same independent profit-maximizing laboratory. We draw on this stylized fact to construct a model where two firms in the same industry offer transfer payments in exchange of user-specific R&​D services from a common laboratory. Inter-firm and within-laboratory externalities affect the intensity of competition among delegating firms on the intermediate market for technology. Whether competition is relatively soft or tight is reflected by each firm's transfer payment offers to the laboratory. This in turn determines the laboratory's capacity to earn profits, R&​D outcomes, delegating firms' profits, and social welfare. We compare the delegated R&​D game to two other ones where firms (i) cooperatively conduct in-house R&​D, and (ii) non-cooperatively choose in-house R&​D. The delegated R&​D game Pareto dominates the other two games, and the laboratory earns positive profits, only if within-laboratory R&​D services are suffciently complementary but inter-firm spillovers are suffciently low. We find no room for policy intervention, because the privately profitable decision to delegate R&​D, when the laboratory participates, always benefits consumers.
  • common agency, externalities, research and development
  • RePEc:gat:wpaper:0610
Language
  • English
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