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Endogenous network formation in patent contests and its role as a barrier to entry

Author

Listed:
  • MARINUCCI, Marco

    (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

  • VERGOTE, Wouter

    (Facultés universitaires Saint-Louis, CEREC, B-1000 Bruxelles, Belgium and Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

Abstract
In a setting of R&D co-opetition we study, by using an all-pay auction approach, how collaboration affects strategic decisions during a patent contest, and how the latter influences the possible collaboration network structures the firms can hope to form. The all pay auction approach allows us to 1) endogenize both network formation and R&D intensities and 2) take heterogeneous and private valuations for patents into account. We find that, different from previous literature, the complete network is not always the only pairwise stable network, even and especially if the benefits from cooperating are important. Interestingly, the other possible stable networks all have the realistic property that some firms decide not to participate in the contest. Thus, weak cooperation through network formation can serve as a barrier to entry on the market for innovation. We further show that there need not be any network that survives a well known refinement of pairwise stability, strong stability, which imposes networks to be immune to coalitional deviations.

Suggested Citation

  • MARINUCCI, Marco & VERGOTE, Wouter, 2009. "Endogenous network formation in patent contests and its role as a barrier to entry," LIDAM Discussion Papers CORE 2009068, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2009068
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2009.html
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    Cited by:

    1. Alexander Matros & David Rietzke, 2024. "Contests on networks," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(3), pages 815-841, November.
    2. Emmanuel Petrakis & Nikolas Tsakas, 2018. "The effect of entry on R&D networks," RAND Journal of Economics, RAND Corporation, vol. 49(3), pages 706-750, September.
    3. Daniel G. Stephenson & Alexander L. Brown, 2021. "Playing the field in all-pay auctions," Experimental Economics, Springer;Economic Science Association, vol. 24(2), pages 489-514, June.
    4. Grandjean, G. & Tellone, D. & Vergote, W., 2016. "Cooperation, Competition and Entry in a Tullock Contest," LIDAM Discussion Papers CORE 2016032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Roketskiy, Nikita, 2018. "Competition and networks of collaboration," Theoretical Economics, Econometric Society, vol. 13(3), September.
    6. repec:lan:wpaper:156630581 is not listed on IDEAS
    7. Miettinen, Topi & Poutvaara, Panu, 2014. "A market for connections," European Journal of Political Economy, Elsevier, vol. 33(C), pages 37-52.
    8. Grandjean, G. & Tellone, D. & Vergote, W., 2017. "Endogenous network formation in a Tullock contest," Mathematical Social Sciences, Elsevier, vol. 85(C), pages 1-10.
    9. Dawid, Herbert & Hellmann, Tim, 2016. "R&D Investments under Endogenous Cluster Formation," Center for Mathematical Economics Working Papers 555, Center for Mathematical Economics, Bielefeld University.

    More about this item

    Keywords

    patent game; networks; R&D cooperation; all-pay auction;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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