Working Paper: CEPR ID: DP9872
Authors: Michael D. König; Xiaodong Liu; Yves Zenou
Abstract: We study a structural model of R&D alliance networks in which firms jointly form R&D collaborations to lower their production costs while competing on the product market. We derive the Nash equilibrium of this game, provide a welfare analysis and determine the optimal R&D subsidy program that maximizes total welfare. We also identify the key firms, i.e. the firms whose exit would reduce welfare the most. We then structurally estimate our model using a panel dataset of R&D collaborations and annual company reports. We use our estimates to identify the key firms and analyze the impact of R&D subsidy programs. Moreover, we analyze temporal changes in the rankings of key firms and how these changes affect the optimal R&D policy.
Keywords: Key firms; Optimal subsidies; R&D networks
JEL Codes: D85; L24; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| key firms exit (L19) | welfare loss (D69) |
| optimal R&D subsidy levels (O38) | total welfare (D69) |
| R&D collaboration (O36) | production costs (D24) |
| R&D collaboration (O36) | output (C67) |
| R&D collaboration (O36) | profit (L21) |
| R&D collaboration (O36) | net effect (D85) |
| spillover effect (D62) | output (C67) |
| spillover effect (D62) | profit (L21) |
| competition effect (D41) | output (C67) |
| competition effect (D41) | profit (L21) |