A Dynamic Analysis of Cooperative Research in the Semiconductor Industry
University of Rochester - Simon Business School
July 7, 2010
International Economic Review, Forthcoming.
Simon School Working Paper No. FR 08-18
In this paper I construct a dynamic oligopolistic model of research joint ventures (RJVs). In my model, when firms form an RJV, they invest to improve product quality, and fully share the rewards of research success. RJVs benefit firms by eliminating duplicative research efforts, but firms also give up the possibility of becoming a solo innovator. Consumers benefit from lower prices, but may have to wait longer for new products to arrive. I show that RJVs are welfare enhancing by quantitatively evaluating these trade-offs with data from the semiconductor industry. I also analyze how changes in product market competition affect research cooperation.
Number of Pages in PDF File: 39
Keywords: Research Joint Venture, Dynamic Model of Oligopoly, Product Innovation, Firm Heterogeneity
JEL Classification: C73, D92, L63, O31
Date posted: February 26, 2009 ; Last revised: August 26, 2010