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R&D Networks

Sanjeev Goyal and José Luis Moraga-González
The RAND Journal of Economics
Vol. 32, No. 4 (Winter, 2001), pp. 686-707
Published by: Wiley on behalf of RAND Corporation
Stable URL: http://www.jstor.org/stable/2696388
Page Count: 22
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R&D; Networks
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Abstract

We develop a model of strategic networks that captures two distinctive features of interfirm collaboration: bilateral agreements and nonexclusive relationships. Our analysis highlights the relationship between market competition, firms' incentives to invest in R&D, and the architecture of collaboration networks. In the absence of firm rivalry, the complete network, where each firm collaborates with all others, is uniquely stable, industry-profit maximizing, and efficient. By contrast, under strong market rivalry the complete network is stable, but intermediate levels of collaboration and asymmetric networks are more attractive from a collective viewpoint. This suggests that competing firms may have excessive incentives to form collaborative links.

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