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R&D networks and absorptive capacity in a Salop model

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  • Correani, Luca
  • Di Dio, Fabio

Abstract

The paper investigates the incentives of Salop-type oligopolistic firms to cooperate and the architecture of the resulting collaboration networks. We find that when spillovers are exogenous, firm profits are not affected by the network structure. On the contrary, with endogenous spillovers (absorptive capacity) firms tend to form less dense networks. We also seek out the architecture of socially efficient networks, showing that social welfare is maximised in the complete network. Also, given the network structure we conclude that a Salop industry could be characterized by a general tendency to under-connection.

Suggested Citation

  • Correani, Luca & Di Dio, Fabio, 2019. "R&D networks and absorptive capacity in a Salop model," Research in Economics, Elsevier, vol. 73(2), pages 123-128.
    • Handle: RePEc:eee:reecon:v:73:y:2019:i:2:p:123-128
    DOI: 10.1016/j.rie.2019.03.001
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    References listed on IDEAS

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    1. Leahy, Dermot & Neary, J. Peter, 2007. "Absorptive capacity, R&D spillovers, and public policy," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 1089-1108, October.
    2. Deroian, Frederic & Gannon, Frederic, 2006. "Quality-improving alliances in differentiated oligopoly," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 629-637, May.
    3. Goyal, Sanjeev & Joshi, Sumit, 2003. "Networks of collaboration in oligopoly," Games and Economic Behavior, Elsevier, vol. 43(1), pages 57-85, April.
    4. Kamien, Morton I. & Zang, Israel, 2000. "Meet me halfway: research joint ventures and absorptive capacity," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 995-1012, October.
    5. Deroian, F., 2008. "Dissemination of spillovers in cost-reducing alliances," Research in Economics, Elsevier, vol. 62(1), pages 34-44, March.
    6. Grunfeld, Leo A., 2003. "Meet me halfway but don't rush: absorptive capacity and strategic R&D investment revisited," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1091-1109, October.
    7. Yasunori Okumura, 2012. "Spatial competition and collaboration networks," International Journal of Game Theory, Springer;Game Theory Society, vol. 41(3), pages 455-472, August.
    8. Frédéric Deroïan & Frédéric Gannon, 2006. "Quality-improving alliances in differentiated oligopoly," Post-Print halshs-00369724, HAL.
    9. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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    Cited by:

    1. Luca Correani & Fabio Di Dio & Patrizio Morganti, 2022. "Does the Nature of Goods Affect Bilateral Exchange of Technology and Location Choice in Stable Networks?," Journal of Industry, Competition and Trade, Springer, vol. 22(3), pages 333-347, December.

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    More about this item

    Keywords

    Salop; Cooperation; R&D networks;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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