Coordination costs and research joint ventures

Rod Falvey, Joanna Poyago-Theotoky*, Khemarat Talerngsri Teerasuwannajak

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

8 Citations (Scopus)

Abstract

We consider a simple oligopoly model where firms engage in cost-reducing R&D and compare two R&D regimes: R&D competition and R&D cooperation in the form of a research joint venture (RJV). We introduce coordination costs for the RJV and examine how these affect the equilibrium outcomes.We find that the performance of the RJV in comparison to R&D competition is sensitive to the level of coordination costs. Although the RJV may no longer conduct a unit of R&D at a lower cost compared to an independent firm in the non-cooperative R&D regime, RJV members can still make savings on their own R&D outlay through information sharing. We establish that there can be profitable but welfare-reducing RJVs and that R&D competition can generate a better outcome depending on the extent of coordination costs.

Original languageEnglish
Pages (from-to)965-976
Number of pages12
JournalEconomic Modelling
Volume33
DOIs
Publication statusPublished - Jul 2013

    Fingerprint

Cite this

Falvey, R., Poyago-Theotoky, J., & Teerasuwannajak, K. T. (2013). Coordination costs and research joint ventures. Economic Modelling, 33, 965-976. https://doi.org/10.1016/j.econmod.2013.03.005