Estimation of R&D Network Formation based on Knowledge Creation Model
by Shinsuke Nakagami
Abstract: This paper constructs a probabilistic model of R&D network formation with two components: firms’ technological scope and partner selection. Prior empirical research has shown that moderate overlap in technological areas between firms fosters innovation. To capture this, our model is built on a knowledge creation model in which inter-firm innovation is determined by a combination of partners’ shared and original technologies, and we estimate the relative weights assigned to these components. The results show that, although the weight placed on technological overlap is large at the network level due to the strong influence of hub firms, it varies across pairs. This implies that alliances between large firms tend to place greater emphasis on overlap, whereas alliances between small firms tend to value partners’ originality.