Research On Corporate R&D Model With Spillover Effects And Vertical Mergers Policy

Facing the fierce market competition, R&D and cooperative R&D of enterpriseshave gradually become an important form to expand their market competitiveness.R&D is always classified as cost-reducing R&D and demand-increasing R&D. Mostof the scholars study the former while we study the demand-increasing R&D behavior.This paper studies that pre-merger and post-merger, enterprise’s decision-makingchoices and the government’s policy choices under the conditions of enterprises inR&D information overflow. First, before enterprises’ vertical mergers, companiesshould select vertical mergers or maintain the cooperative R&D form, and governmentshould support or limit vertical mergers. Second, after mergers, the enterprise andgovernment should choose to set up the firewall or not due to that the spillover effectscauses unfair competition. In this paper, we establish three game models to studythese problems and provide recommendations for enterprises and government.In this paper, we set three models to solve and analyze those problems. First, weset a Duopoly R&D model with bidirectional overflow and analysis three cases—notR&D, single R&D and both R&D. We get the equilibrium solutions by solving themodel, and we get the conclusion that for duopoly enterprises information overflowwill dampen its R&D investment enthusiasm of enterprises, the enterprise shouldreduce information overflow through technology and internal management, and thegovernment should regulate the intellectual property protection efforts based on socialneeds. Second, we extend the above model and set a game model of a verticallyintegrated monopoly upstream market and compete with non-integrated companies inthe downstream market. By solving and analyzing the model, we get the equilibriumoutcomes and how overflow and R&D investment innovation rate affects on theequilibrium outcomes. We also get that the vertically-integrated upstream firm shouldnot choose to set up a " firewall", the Government requires a combination of thedegree of product differentiation and R&D investment innovation rate in differentcombinations to develop policies to support or limit the establishment of a "firewall".Finally, considering that vertical merger is the performance of the supply chainmaximize to collaborative R&D, we establish a one-way spillover effect on theupstream and downstream enterprises under cooperative R&D and R&D cost-sharingmodel, then solve and analysis the model and compare the results with Chapter Three. We get the conclusions that modest R&D overflow would be more appropriate to theinnovation needs of emerging industry sectors, while keeping a lower level of R&Dinformation overflow to is necessary for those who already have a long history of thedevelopment sectors. Enterprises should combine with the R&D investmentinnovation rate and information overflow level to determine the select verticalmergers or cooperative R&D form. The government should support or limit verticalmergers activity is mainly depending on which mode leads to a higher R&D level forthe community. These conclusions provide a theoretical basis in the decision-makingfor enterprises and government.