When Spillovers Enhance R&D Incentives

Chatterjee, Rittwik and Chattopadhyay, Srobonti and Kabiraj, Tarun (2018): When Spillovers Enhance R&D Incentives.

Abstract

It is commonly believed that spillover reduces R&D incentives of a firm. This happens because of the non-appropriability problem. However, some empirical literature shows the possibility of enhanced R&D incentives under spillovers. While this is explained in the literature under incomplete information, we show that this may hold even under complete information. We show in particular that in a duopoly there are situations when with no spillovers only one firm invests in R&D, but under spillovers both the firms invest. This occurs when there is complementarity in research and the spillover is below a critical level.

• Item Type: MPRA Paper
• Language: English
• Keywords: R&D spillovers, non-appropriability problem, complete information, R&D incentives.
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives

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