The Efficiency and Evolution of R&D Networks

CER-ETH - Center of Economic Research at ETH Zurich, Working Paper No. 08/95

60 Pages Posted: 23 Sep 2008

See all articles by Michael Koenig

Michael Koenig

ETH Zürich

Stefano Battiston

University of Zurich - Department of Banking and Finance; Ca Foscari University of Venice

M. Napoletano

ETH Zürich

Frank Schweitzer

Observatoire Français des Conjonctures Economiques (OFCE)

Date Written: September 2008

Abstract

This work introduces a new model to investigate the efficiency and evolution of networks of firms exchanging knowledge in R&D partnerships. We first examine the efficiency of a given network structure in terms of the maximization of total profits in the industry. We show that the efficient network structure depends on the marginal cost of collaboration. When the marginal cost is low, the complete graph is efficient. However, a high marginal cost implies that the efficient network is sparser and has a core-periphery structure. Next, we examine the evolution of the network structure when the decision on collaborating partners is decentralized. We show the existence of multiple equilibrium structures which are in general inefficient. This is due to (i) the path dependent character of the partner selection process, (ii) the presence of knowledge externalities and (iii) the presence of severance costs involved in link deletion. Finally, we study the properties of the emerging equilibrium networks and we show that they are coherent with the stylized facts of R&D networks.

Keywords: R&D networks, technology spillovers, network efficiency, network formation

JEL Classification: D85, L24, O33

Suggested Citation

Koenig, Michael and Battiston, Stefano and Napoletano, M. and Schweitzer, Frank, The Efficiency and Evolution of R&D Networks (September 2008). CER-ETH - Center of Economic Research at ETH Zurich, Working Paper No. 08/95, Available at SSRN: https://ssrn.com/abstract=1271877 or http://dx.doi.org/10.2139/ssrn.1271877

Michael Koenig (Contact Author)

ETH Zürich ( email )

Zürichbergstrasse 18
8092 Zurich, CH-1015
Switzerland

Stefano Battiston

University of Zurich - Department of Banking and Finance ( email )

Andreasstrasse 15
Zürich, 8050
Switzerland

Ca Foscari University of Venice ( email )

Cannaregio 873
Venice, 30121
Italy

M. Napoletano

ETH Zürich ( email )

Zürichbergstrasse 18
8092 Zurich, CH-1015
Switzerland

Frank Schweitzer

Observatoire Français des Conjonctures Economiques (OFCE) ( email )

69 Quai d'Orsay
Paris 75004
France

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