nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2012‒07‒08
four papers chosen by
Rui Baptista
Technical University of Lisbon

  1. Horizontal Agreements and R&D Complementarities: Merger versus RJV By Ben Ferrett; Joanna Poyago-Theotoky
  2. Exports, R&D and Productivity: A test of the Bustos-model with German enterprise data By Joachim Wagner
  3. R&D Competition in an Asymmetric Cournot Duopoly: The Welfare Effects of Catch-Up by the Laggard Firm By Ben Ferrett
  4. Market concentration and productivity in the United States corn sector: 2002-2009 By Nolan, Elizabeth; Santos, Paulo; Shi, Guanming

  1. By: Ben Ferrett (School of Business and Economics, Loughborough University, UK); Joanna Poyago-Theotoky (School of Economics, La Trobe University, Australia)
    Abstract: We study the decision of two firms within an oligopoly concerning whether to enter into a horizontal agreement to exploit complementarities between their R&D activities and, if so, whether to merge or form a research joint venture (RJV). In contrast to horizontal merger, there is a probability that an RJV contract will fail to enforce R&D sharing. We find, first, that a horizontal agreement always arises. The insiders’ merger/RJV choice involves a trade-off. While merger offers certainty that R&D complementarities will be exploited, it leads to a profit-reducing reaction by outsiders on the product market, where competition is Cournot. Greater brand similarity and contract enforceability (“quality”) both favour RJV, while greater R&D complementarity favours merger. Interestingly, the insiders may choose to merge even when RJV contracts are always enforceable, and they may opt to form an RJV even when the likelihood of enforceability is negligible.
    Keywords: horizontal merger, research joint venture (RJV), contract enforceability, process R&D, R&D complementarity
    JEL: O30 L13 D43
    Date: 2012–04
  2. By: Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This paper presents the first empirical test with German firm level data of a hypothesis derived by Bustos (AER 2011) in a model that explains the decision of heterogeneous firms to export and to engage in R&D. Using a non-parametric test for first order stochastic dominance it is shown that, in line with this hypothesis, the productivity distribution of firms with exports and R&D dominates that of exporters without R&D, which in turn dominates that of firms that neither export nor engage in R&D. These results are in line with findings for Argentina. The model, therefore, seems to be useful to guide empirical work on the relation between exports, R&D and productivity.
    Keywords: Exports, R&D, productivity, Germany
    JEL: F14
    Date: 2012–06
  3. By: Ben Ferrett (School of Business and Economics, Loughborough University, UK)
    Abstract: The substantial within-industry variation in firm productivity typically observed in the data suggests that there is ample scope for catch-up by laggard firms. We analyse the normative effects of such catch-up. In the short run, where firms’ process technologies are fixed, catch-up can reduce social welfare if the initial unit-cost gap between firms is sufficiently large (the Lahiri/Ono effect). However, in the long run, where firms invest in process R&D to maximize profits, social welfare jumps upwards following catch-up if it causes the major firm’s R&D spending lead to grow. Both qualitative insights appear quite general.
    Keywords: asymmetric duopoly, catch-up, social welfare, process R&D.
    JEL: D61 L13 O33
    Date: 2012–04
  4. By: Nolan, Elizabeth; Santos, Paulo; Shi, Guanming
    Abstract: There is a large literature which investigates the relationship between market concentration and innovation. It is difficult to find a suitable measure for innovative output. We use a rich dataset based on university trials of corn hybrids to estimate, using fixed effects, a production function. We predict the fixed effects, by year and Crop Reporting District (CRD), for each hybrid to identify the amount of yield that is directly related to the genetics of the hybrids. We combine this dataset with one which provides information for market concentration, and find, using two stage least squares, that there is a positive relationship between market concentration and innovation.
    Keywords: corn hybrids, innovation, instrumental variables, market concentration., Industrial Organization, Production Economics, Productivity Analysis,
    Date: 2012

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