Coordination costs and research joint ventures

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Journal Article

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Falvey, R. Poyago-Theotoky, J., & Teerasuwannajuk, K.T. (2013) Coordination costs and research joint ventures. Economic Modelling, 33, 965-976.

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2013 HERDC submission. FoR code: 140210

© Copyright, Elsevier B.V., 2013




We consider a simple oligopoly model where firms engage in cost-reducing R&D and compare two R&D regimes: R&D competition and R&D cooperation in the form of a research joint venture (RJV). We introduce coordination costs for the RJV and examine how these affect the equilibrium outcomes. We find that the performance of the RJV in comparison to R&D competition is sensitive to the level of coordination costs. Although the RJV may no longer conduct a unit of R&D at a lower cost compared to an independent firm in the non-cooperative R&D regime, RJV members can still make savings on their own R&D outlay through information sharing. We establish that there can be profitable but welfare-reducing RJVs and that R&D competition can generate a better outcome depending on the extent of coordination costs.

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