Endogenous technology sharing in R&D intensive industries

Abstract

This paper analyses the endogenous formation of technology sharing coalitions with asymmetric firms. Coalition partners enjoy perfect spillovers from technology advancements by their coalition partners, but each firm determines its R&D investment level non-cooperatively and there is no co-operation in the product market. We show that the equilibrium coalition outcome is one between the two most efficient firms, and that this is also the preferred outcome of a welfare maxmising authority. Furthermore, we show that the equilibrium outcome results in the lowest total R&D investment of all possible outcomes.