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Endogenous Network Formation in Patent Contests And Its Role as A Barrier to Entry

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  • Marco Marinucci
  • Wouter Vergote

Abstract

In a setting of R&D co-opetition we study, by using an all-pay auction approach, how collaboration affects strategic decisions during a patent contest, and how the latter influences the possible collaboration network structures the firms can hope to form. The all pay auction approach allows us to 1) endogenize both network formation and R&D intensities and 2) take heterogeneous and private valuations for patents into account. We find that, different from previous literature, the complete network is not always the only pairwise stable network, even and especially if the benefits from cooperating are important. Interestingly, the other possible stable networks all have the realistic property that some firms decide not to participate in the contest. Thus, weak cooperation through network formation can serve as a barrier to entry on the market for innovation. We further show that there need not be any network that survives a well known refinement of pairwise stability, strong stability, which imposes networks to be immune to coalitional deviations.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Marco Marinucci & Wouter Vergote, 2011. "Endogenous Network Formation in Patent Contests And Its Role as A Barrier to Entry," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 529-551, December.
    • Handle: RePEc:bla:jindec:v:59:y:2011:i:4:p:529-551
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    File URL: http://hdl.handle.net/10.1111/
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    Cited by:

    1. Daniel G. Stephenson & Alexander L. Brown, 2021. "Playing the field in all-pay auctions," Experimental Economics, Springer;Economic Science Association, vol. 24(2), pages 489-514, June.
    2. Grandjean, G. & Tellone, D. & Vergote, W., 2016. "Cooperation, Competition and Entry in a Tullock Contest," LIDAM Discussion Papers CORE 2016032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Grandjean, G. & Tellone, D. & Vergote, W., 2017. "Endogenous network formation in a Tullock contest," Mathematical Social Sciences, Elsevier, vol. 85(C), pages 1-10.
    4. Miettinen, Topi & Poutvaara, Panu, 2014. "A market for connections," European Journal of Political Economy, Elsevier, vol. 33(C), pages 37-52.
    5. Dawid, Herbert & Hellmann, Tim, 2016. "R&D Investments under Endogenous Cluster Formation," Center for Mathematical Economics Working Papers 555, Center for Mathematical Economics, Bielefeld University.
    6. Alexander Matros & David Rietzke, 2024. "Contests on networks," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(3), pages 815-841, November.
    7. Roketskiy, Nikita, 2018. "Competition and networks of collaboration," Theoretical Economics, Econometric Society, vol. 13(3), September.
    8. Emmanuel Petrakis & Nikolas Tsakas, 2018. "The effect of entry on R&D networks," RAND Journal of Economics, RAND Corporation, vol. 49(3), pages 706-750, September.
    9. repec:lan:wpaper:156630581 is not listed on IDEAS

    More about this item

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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