nep-net New Economics Papers
on Network Economics
Issue of 2008‒09‒29
four papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. The Efficiency and Evolution of R&D Networks By Michael D. König; S. Battiston; M. Napoletano; F. Schweitzer
  2. The Small Core of the German Corporate Board Network By Simone Alfarano; Thomas Lux; Mishael Milakovic
  3. Spanning the Institutional Abyss: The Intergovernmental Network and the Governance of Foreign Direct Investment By Juan Alcacer; Paul Ingram
  4. Learning from the economics of networks to enhance poverty alleviation in African cotton zones By Michel Fok

  1. By: Michael D. König (Chair of Systems Design, ETH Zurich, Switzerland); S. Battiston (Chair of Systems Design, ETH Zurich, Switzerland); M. Napoletano (Chair of Systems Design, ETH Zurich and Observatoire Français des Conjonctures Economiques, Department for Research on Innovation and Competition, Valbonne, France); F. Schweitzer (Chair of Systems Design, ETH Zurich, Switzerland)
    Abstract: This work introduces a new model to investigate the efficiency and evolution of networks of firms exchanging knowledge in R&D partnerships. We first examine the efficiency of a given network structure in terms of the maximization of total profits in the industry. We show that the efficient network structure depends on the marginal cost of collaboration. When the marginal cost is low, the complete graph is efficient. However, a high marginal cost implies that the efficient network is sparser and has a core-periphery structure. Next, we examine the evolution of the network struc- ture when the decision on collaborating partners is decentralized. We show the existence of mul- tiple equilibrium structures which are in general inefficient. This is due to (i) the path dependent character of the partner selection process, (ii) the presence of knowledge externalities and (iii) the presence of severance costs involved in link deletion. Finally, we study the properties of the emerg- ing equilibrium networks and we show that they are coherent with the stylized facts of R&D net- works.
    Keywords: R&D networks, technology spillovers, network efficiency, network formation
    JEL: D85 L24 O33
    Date: 2008–09
  2. By: Simone Alfarano; Thomas Lux; Mishael Milakovic
    Abstract: We consider the current bipartite graph of German corporate boards and identify a small core of directors who are highly central in the entire network while being densely connected among themselves. To identify the core, we compare the actual number of board memberships to a random benchmark, focusing on deviations from the benchmark that span several orders of magnitude. It seems that the board appointment decisions of largely capitalized companies are the driving force behind the existence of a core in Germany’s board and director network. Conditional on being a board member, it is very improbable to obtain a second membership, but multiple board membership becomes increasingly likely once this initial barrier is overcome. We also present a simple model that describes board appointment decisions as a trade-off between social capital and monitoring ability
    Keywords: Board and director interlocks, network core, network formation, market capitalization
    JEL: D85 L20 M14 M51
    Date: 2008–09
  3. By: Juan Alcacer (Harvard Business School, Strategy Unit); Paul Ingram (Columbia Business School, Columbia University)
    Abstract: Global economic transactions such as foreign direct investment must extend over an institutional abyss between the jurisdiction, and therefore protection, of the states involved. Intergovernmental organizations (IGOs), whose members are states, represent an important attempt to span this abyss. IGOs are mandated variously to smooth economic transactions, facilitate global cooperation, and promote cultural contact and awareness. We use a network approach to demonstrate that the connections between two countries through joint-membership in the same IGOs are associated with a large positive influence on the foreign direct investment that flows between them. Moreover, we show that this effect occurs not only in the case of IGOs that focus on economic issues, but also on those with social and cultural mandates. This demonstrates that relational governance is important and feasible in the global context, and for the most risky transactions. Finally we examine the interdependence between the IGO network and the domestic institutions of states. The interdependence between these global and domestic institutional forms is complex, with target-country democracy being a substitute for economic IGOs, but a compliment for social and cultural IGOs.
    Date: 2008–08
  4. By: Michel Fok (Annual crop systems - CIRAD : UPR102)
    Abstract: Cotton sectors in Sub-Saharan Africa (SSA) were run by monopolistic para-statal organisms for a long time. They embarked upon a restructuring/liberalisation process as of the mid-1980s but the outcomes were mitigated at best. As these sectors resemble service distribution networks (telecommunication, power, etc.) in terms of historical monopolies and deregulation, cotton development in SSA could be reviewed and their current restructuring appraised according to economics of networks models.This paper stresses that cotton sectors in SSA could be considered as service networks. They have a 3-layer morphology and comply with the five recognition criteria as suggested by Curien (2000). Stylised facts regarding network dynamics closely fit former cotton sector development patterns in most SSA countries. Cotton development did not occur without the related networks reaching a critical size that public intervention helped to attain through a time-demanding process.In areas where cotton production is not very developed, it would not be worthwhile to attempt to restructure existing cotton networks as they are of insufficient size. Where cotton production is well developed, such deregulation could be considered but not through a vertical disintegration procedure. Splitting an existing nationwide monopoly into a limited number of local monopolies is a way of preserving vertical integration and of facilitating geographical regulation which should be more efficient and comprehensive than regulating only through purchase price fixing.
    Keywords: economics of networks; cotton; deregulation; Mali; privatization; liberalization
    Date: 2008–01–08

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