Discussion Paper Details

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Title: Endogenous Technology Cycles in Dynamic R&D Networks

Author(s): Michael König and Tim Rogers

Publication Date: November 2018

Keyword(s): Innovation, network formation, R&D networks and technology cycles

Programme Area(s): Industrial Organization

Abstract: We study the coevolutionary dynamics of knowledge creation and diffusion with the formation of R&D collaboration networks. Differently to previous works, we do not treat knowledge as an abstract scalar variable, but rather represent it as a multidimensional portfolio of technologies. Over time the composition of this portfolio may change due innovations and knowledge spillovers between collaborating firms. The collaborations between firms, in turn, are dynamically adjusted based on the firms' expectations of learning a new technology from their collaboration partners. We show that the interplay between knowledge diffusion, network formation and competition across sectors can give rise to a cyclical pattern in the collaboration intensity, which can be described as a damped oscillation. This theoretical finding recapitulates the novel observation of oscillations in an empirical sample of a large R&D collaboration network over several decades. Finally, we apply our findings to describe how an effective R&D policy can balance subsidies for entrants as well as R&D collaborations between incumbent firms.

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Bibliographic Reference

König, M and Rogers, T. 2018. 'Endogenous Technology Cycles in Dynamic R&D Networks'. London, Centre for Economic Policy Research.