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Competition and private R&D investment

Author

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  • Thomas Grebel

    (TU - Technische Universität Ilmenau)

  • Lionel Nesta

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

Abstract

We investigate the determinants of the sign of Research and Development reaction functions of rival firms. Using a two-stage n-firm Cournot competition game, we show that this sign depends on four types of environments in terms of product rivalry and technology spillovers. We test the predictions of the model on the world's largest manufacturing corporations. Assuming that firms make R&D investments based on the R&D effort of the representative rival company, we develop a dynamic panel data model that accounts for the endogeneity of the decision of the rival firm. Empirical results thoroughly corroborate the validity of the theoretical model.

Suggested Citation

  • Thomas Grebel & Lionel Nesta, 2020. "Competition and private R&D investment," Post-Print hal-03042941, HAL.
    • Handle: RePEc:hal:journl:hal-03042941
    DOI: 10.1371/journal.pone.0232119
    Note: View the original document on HAL open archive server: https://hal.science/hal-03042941
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