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Absorptive capacity and R&D strategy in mixed duopoly with labor-managed and profit-maximizing firms

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  • Luo, Jianli

Abstract

In a mixed duopoly with a labor-managed firm and a profit-maximizing firm coexisting, this paper explores the effect of technology absorptive capacity on firms' output decision, R&D investment decision and social welfare. Firstly, we develop a two-stage R&D game model on the basis of cost-reducing R&D with spillover and absorptive capacity. Secondly, we explore the strategic interactions of output, R&D investment and social welfare respectively in the mixed duopoly with a labor-managed and a profit-maximizing firms. Finally we analyze the effects of absorptive capacity on output decision, strategic investment decision and social welfare respectively. The research suggests that labor-managed firms employ less workers and produce less outputs while they invest more in R&D than that of profit-maximizing firms. Whether the effect of absorptive capacity increases R&D investment of labor-managed firms or not depends on the returns to scale. However, it bears no relationship to the returns to scale of the profit-maximizing firm.

Suggested Citation

  • Luo, Jianli, 2013. "Absorptive capacity and R&D strategy in mixed duopoly with labor-managed and profit-maximizing firms," Economic Modelling, Elsevier, vol. 31(C), pages 433-439.
    • Handle: RePEc:eee:ecmode:v:31:y:2013:i:c:p:433-439
    DOI: 10.1016/j.econmod.2012.12.009
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    8. Ohnishi, Kazuhiro, 2019. "Capacity choice in an international mixed triopoly," MPRA Paper 94051, University Library of Munich, Germany.
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    10. HIGASHIDA Keisaku, 2018. "Subsidies to Public Firms and Competition Modes under a Mixed Duopoly," Discussion papers 18001, Research Institute of Economy, Trade and Industry (RIETI).

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