PhD Seminar: Estimation of R&D Network Formation based on Knowledge Creation Model

Estimation of R&D Network Formation based on Knowledge Creation Model

This paper develops a stochastic model of R&D network formation in which firms choose R&D effort and collaboration partners, taking their technology portfolios as given. Based on the knowledge creation model, this paper captures technological overlap and complementarity as sources of collaboration benefits, i.e., spillovers depend on both technologies shared by the two firms and those unique to each partner. Using data on R&D networks in the IT sector in the US, I estimate the relative importance of these components. The estimates indicate that shared technologies play a greater role in generating spillovers, making collaboration links more likely to form between firms. Ignoring this technological structure overestimates the spillover parameter. Counterfactual simulations also show that uniform subsidies to collaboration costs do not improve welfare.