The Strategic Timing of R&D Agreements

37 Pages Posted: 11 May 2011

See all articles by Marco A. Marini

Marco A. Marini

University of Rome La Sapienza; CREI, University Rome III

Maria Luisa Petit

affiliation not provided to SSRN

Roberta Sestini

University of Rome I

Date Written: May 5, 2011

Abstract

We present a model of endogenous formation of R&D agreements among firms in which also the timing of R&D investment is made endogenous. The purpose is to bridge two usually separate streams of literature, the noncooperative formation of R&D alliances and the endogenous timing literature. Our approach allows to consider the formation of R&D agreements over time. It is shown that, when both R&D spillovers and investment costs are sufficiently low, firms may find difficult to maintain a stable R&D agreement due to the strong incentive to invest noncooperatively as leaders. In such a case, to be stable a R&D agreement requires that the joint investment occurs at the initial stage, avoiding any delay. When instead R&D spillover rates are sufficiently high, the cooperation in R&D constitutes a profitable option, although firms also possess the incentive to sequence their investment over time. Finally, when spillovers are asymmetric and the knowledge leaks mainly from the leader to the follower, to invest as follower becomes extremely profitable, making R&D alliances hard to sustain unless firms strategically delay their joint investment in R&D.

Keywords: R&D investment, Spillovers, Endogenous Timing

JEL Classification: C72, D43, L11, L13, O30

Suggested Citation

Marini, Marco A. and Petit, Maria Luisa and Sestini, Roberta, The Strategic Timing of R&D Agreements (May 5, 2011). Available at SSRN: https://ssrn.com/abstract=1832233 or http://dx.doi.org/10.2139/ssrn.1832233

Marco A. Marini (Contact Author)

University of Rome La Sapienza ( email )

Piazzale Aldo Moro, 5
Rome, 00181
Italy
+39 06 49910843 (Phone)

HOME PAGE: http://https://sites.google.com/a/uniroma1.it/marcomarini-eng/

CREI, University Rome III ( email )

Via Ostiense, 161
Rome, 00154
Italy

HOME PAGE: http://host.uniroma3.it/centri/crei/

Maria Luisa Petit

affiliation not provided to SSRN ( email )

Roberta Sestini

University of Rome I ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

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