Monday, April 25, 2016
Emmanuel Petrakis, University of Crete - Department of Economics and Nikolas Tsakas, University of Cyprus - Department of Economics examine The Effect of Entry on R&D Networks.
ABSTRACT: We study the effect of potential entry on the formation and stability of R&D networks considering farsighted firms. In particular, we seek to understand whether the incentives for forming R&D collaborations may be altered by the presence of a potential entrant, as well as which are the factors that affect these incentives. We find that an incumbent firm might be willing to sustain an otherwise undesirable collaboration in order to prevent the entry of a new competitor, as well as to refrain from establishing an otherwise desirable collaboration, expecting to form a more profitable collaboration with the entrant. We also find that entry may lead an inefficient incumbent firm to exit the market.