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Spillovers, Product Substitution and R&D Investment: Theory and Evidence



Type:   Working paper
Titre:   Spillovers, Product Substitution and R&D Investment: Theory and Evidence
Auteur(s):   Nesta, Lionel (1970-...) - Observatoire français des conjonctures économiques (Auteur)
Grebel, Thomas - 2441/5adcidkke9omt0s9p6icichbk (Auteur)
Date de publication:   2013-10
Éditeur:   Paris  :  OFCE
Collection:   Working paper de l'OFCE  :  2013-22
Mots-clés:   [fr] Process R&D, spillovers, product substitution , reaction function, GMM
JEL:   D43,  L13,  O31
Résumé:   [en] We investigate the conditions under which R&D investment by rival firms may be negatively or positively correlated. Using a two-stage game the influence of spillovers and product substitution is investigated. It is shown that under Cournot competition, the sign of the R&D reaction function depends on four types of environments in terms of the level of product substitution and of spillovers. We then test the prediction of the model on the world’s largest manufacturing corporations. We assume that firms make oblivious R&D investments based on the R&D decision of the average rival company. We then develop a dynamic panel data model that accounts for the endogeneity of the decision of the mean rival firms. Results corroborate the validity of the theoretical model.


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