A Dynamic Analysis of Cooperative Research in the Semiconductor Industry

International Economic Review, Forthcoming.

Simon School Working Paper No. FR 08-18

39 Pages Posted: 26 Feb 2009 Last revised: 26 Aug 2010

See all articles by Minjae Song

Minjae Song

Bates White Economic Consulting

Date Written: July 7, 2010

Abstract

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.

Keywords: Research Joint Venture, Dynamic Model of Oligopoly, Product Innovation, Firm Heterogeneity

JEL Classification: C73, D92, L63, O31

Suggested Citation

Song, Minjae, A Dynamic Analysis of Cooperative Research in the Semiconductor Industry (July 7, 2010). International Economic Review, Forthcoming., Simon School Working Paper No. FR 08-18 , Available at SSRN: https://ssrn.com/abstract=1349963 or http://dx.doi.org/10.2139/ssrn.1349963

Minjae Song (Contact Author)

Bates White Economic Consulting ( email )

1300 I Street NW
Washington, DC DC 20005
United States
2027471404 (Phone)

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