Meet me halfway but don’t rush: absorptive capacity and strategic R&D investment revisited
By Leonie Grünfeld. 2003
111 citations recorded by the source corpus.
Abstract In this paper, we analyse how R&D investment decisions are affected by R&D spillovers between firms, taking into consideration that more R&D investment improves the ability to learn from competing firms—the so-called absorptive capacity effect of R&D. Contrary to earlier studies, we show that absorptive capacity effects of own R&D do not necessarily drive up the incentive to invest in R&D. This only happens when the market size is small or the absorptive capacity effect is weak. Otherwise, firms will actually choose to cut down on R&D. Furthermore, absorptive capacity effects also increase the critical rate of spillovers that determines whether a research joint venture generates more R&D investment than a non-cooperative setting. Finally, we show that strong learning effects of own R&D are not necessarily good for welfare. Moreover, if the market size is large, welfare will be at its highest when the learning effect is small.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/ba9bff815bea16a60665c0dfcb83a68d1def7ee5
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Citations in the corpus
- Absorptive capacity, R&D spillovers, and public policy (2007, unknown): “ Grunfeld (2003) uses a different variant, with βγ equal to (β+sx)/(1+sx) and s interpreted as a "learning" parameter.”
- Non-R&D SMEs: external knowledge, absorptive capacity and product innovation (2014, background): “2001), level of R&D investment (Grünfeld 2003; Leahy and Neary 2007), continuous R&D activities (Cassiman and Veugelers 2006; Chun and Mun 2012) and existence of a R&D”