Hybrid R&D

We develop a model of R&D competition and collaborationin which individual firms carry out independent in-house researchand also undertake joint research projects with other firms. Weexamine the impact of collaboration on in-house research andexplore the circumstances under which a hybrid organization ofR&D which combines the two is optimal for firms andsociety. We find that investments in independent research and injoint research are complementary: an increase in the number ofjoint projects also increases in-house research. Firm profits arehighest under a hybrid organization if the number of firms issmall (less than 5) while they are highest with pure in-houseresearch if the number of firms is large (5 or more). However,social welfare is maximized under a hybrid organization of R&D inall cases. Our analysis also yields new results on the role ofcooperative R&D. We find that non-cooperative decision making byfirms leads to larger R&D investments and higher social welfarethan fully cooperative decision making. However, a hybrid form ofdecision making where there is bilateral cooperation in jointprojects and non-cooperative decision making in in-house researchyields the highest level of welfare in concentrated industries.

Hybrid R&D

We develop a model of R&D competition and collaboration in which individual firms carry out independent in-house research and also undertake joint research projects with other firms. We examine the impact of collaboration on in-house research and explore the circumstances under which a hybrid organization of R&D which combines the two is optimal for firms and society. We find that investments in independent research and in joint research are complementary: an increase in the number of joint projects also increases in-house research. Firm profits are highest under a hybrid organization if the number of firms is small (less than 5) while they are highest with pure in-house research if the number of firms is large (5 or more). However, social welfare is maximized under a hybrid organization of R&D in all cases. Our analysis also yields new results on the role of cooperative R&D. We find that non-cooperative decision making by firms leads to larger R&D investments and higher social welfare than fully cooperative decision making. However, a hybrid form of decision making where there is bilateral cooperation in joint projects and non-cooperative decision making in in-house research yields the highest level of welfare in concentrated industries.

R&D Depreciation Rates in the 2007 R&D Satellite Account

This paper is part of a series that provides the details behind the Bureau of Economic Analysis’s (BEA) satellite account on research and development (R&D) activity. In the current work, the focus is on industry-specific depreciation rates for business R&D capital. This paper begins by discussing the literature on R&D depreciation rates. It then describes how the rates in the 2007 satellite account were chosen from the related findings.