TY - JOUR
T1 - Meet me halfway
T2 - Research joint ventures and absorptive capacity
AU - Kamien, Morton I.
AU - Zang, Israel
N1 - Funding Information:
We are grateful to Rabah Amir, Bruno Cassiman, Randall Kamien, Dennis Mueller, Tore Nilssen, Bruce Peterson, Joel Sandonis, Joachim Schwalbach, and Changqi Wu for very useful discussions, and we owe a special debt to Anna Hammerschmidt for pointing out the error of our ways so that we could obtain some of our results for the right reasons. Stephen Martin and the referee were very helpful in clarifying our analysis. This project was supported by the Heizer Center for Entrepreneurship.
PY - 2000/10
Y1 - 2000/10
N2 - We propose a representation of a firm's 'effective' R&D effort level that reflects how both its R&D approach and R&D budget influences its ability to realize spillovers from other firms' R&D activity, i.e. its 'absorptive capacity', and generalizes the commonly employed representation. The ability to choose an R&D approach is accommodated by positing a three-stage game in which the choice of an R&D approach is made in its first stage. The firms' R&D budgets and output levels are chosen in the game's second and third stages, respectively. It is found that when firms cooperate in the setting of their R&D budgets, i.e. form a research joint venture, they choose identical broad R&D approaches. On the other hand, if they do not form a research joint venture, then they choose firm-specific R&D approaches unless there is no danger of exogenous spillovers. The analysis suggests that the commonly employed representation of firms' effective R&D investment levels implicitly presupposes that the firms have chosen to cooperate in setting their R&D budgets.
AB - We propose a representation of a firm's 'effective' R&D effort level that reflects how both its R&D approach and R&D budget influences its ability to realize spillovers from other firms' R&D activity, i.e. its 'absorptive capacity', and generalizes the commonly employed representation. The ability to choose an R&D approach is accommodated by positing a three-stage game in which the choice of an R&D approach is made in its first stage. The firms' R&D budgets and output levels are chosen in the game's second and third stages, respectively. It is found that when firms cooperate in the setting of their R&D budgets, i.e. form a research joint venture, they choose identical broad R&D approaches. On the other hand, if they do not form a research joint venture, then they choose firm-specific R&D approaches unless there is no danger of exogenous spillovers. The analysis suggests that the commonly employed representation of firms' effective R&D investment levels implicitly presupposes that the firms have chosen to cooperate in setting their R&D budgets.
KW - Absorptive capacity
KW - Joint ventures
KW - L1
KW - O3
KW - Subgame perfect Nash equilibrium
UR - http://www.scopus.com/inward/record.url?scp=0034376236&partnerID=8YFLogxK
U2 - 10.1016/s0167-7187(00)00054-0
DO - 10.1016/s0167-7187(00)00054-0
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AN - SCOPUS:0034376236
SN - 0167-7187
VL - 18
SP - 995
EP - 1012
JO - International Journal of Industrial Organization
JF - International Journal of Industrial Organization
IS - 7
ER -