Open AccessCompetition and private R&D investment
Author(s) -
Thomas Grebel,
Lionel Nesta
Publication year - 2020
Publication title -
plos one
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.99
H-Index - 332
ISSN - 1932-6203
DOI - 10.1371/journal.pone.0232119
Subject(s) - cournot competition , endogeneity , rivalry , competition (biology) , economics , investment (military) , microeconomics , sign (mathematics) , panel data , product (mathematics) , industrial organization , econometrics , biology , ecology , mathematical analysis , geometry , mathematics , politics , political science , law
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.