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Network compatibility, intensity of competition and process R&D: A Generalization

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  • Sumit Shrivastav

    (Indira Gandhi Institute of Development Research)

Abstract

This paper analyses implications of network compatibility and competition on process innovation in differentiated network goods duopoly. It shows that firms R&D investments are strategic substitutes (complements), if effective network compatibility is less (more) than product substitutability, regardless of the nature of competition. If R&D investments are strategic complements, firms always invest in process innovation and they invest more under Bertrand competition than under Cournot competition. If R&D investments are strategic substitutes, unlike Cournot firms, Bertrand firms dont always undertake process innovation; but, when Bertrand firms also undertake process innovation, Cournot-Bertrand R&D ranking depends on the strength of network externalities.

Suggested Citation

  • Sumit Shrivastav, 2020. "Network compatibility, intensity of competition and process R&D: A Generalization," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-007, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2020-007
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    References listed on IDEAS

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    More about this item

    Keywords

    Network compatibility; Network Externalities; Process R&D; Bertrand-Cournot Compari- son; Product Differentiation;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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