R_and_D_collaboration_World_Economy-4.pdf (642.18 kB)
Download fileInter-firm R&D collaboration within and across national borders
journal contribution
posted on 2019-06-03, 13:22 authored by Huw EdwardsHuw Edwards, Ben FerrettBen Ferrett, D. GravinoWe set up a model to investigate the strategic aspect of a firm’s
incentive to collaborate in cost-reducing R&D with either a local or a
foreign partner. We argue that collaboration with a foreign firm is preferred to collaboration with a local firm if the extra profits generated by
a foreign collaboration exceed the additional cost of coordinating collaboration across national borders. We show that foreign collaboration is
more likely the bigger the home-market-size of the foreign firm and, given
certain conditions, the higher the international trade cost. We also show
that whenever a foreign collaboration arises in equilibrium, it is efficient
(i.e. world-welfare-maximising); and that there are cases where: (i) a
foreign collaboration would be efficient but a local collaboration emerges
in equilibrium; and (ii) an efficient foreign collaboration emerges in equilibrium, but one of the countries would prefer a local collaboration. We
briefly consider the policy implications of these findings.
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