Absorptive capacity and innovation: when is it better to cooperate?

Journal of Economic Dynamics and Control

Egbetokun

2016

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This paper extends the existing literature on strategic R&D alliances by resenting a model of innovation networks with endogenous absorptive capacity. The networks emerge as a result of bilateral cooperation over time between firms occupying different locations in the knowledge space. Social capital is ignored, and firms ally purely on the basis of knowledge considerations. Partner selection is driven largely by absorptive capacity which is itself influenced by cognitive distance and investment allocation between inventive and absorptive R&D. Cognitive distance between firms changes as a function of the intensity of cooperation and innovation. Within different knowledge regimes, we examine the structure of networks that emerge and how firms perform within such networks. Our model replicates some stylised empirical results on network structure and the contingent effects of network position on innovative performance. We find networks that exhibit small world properties which are generally robust to changes in the knowledge regime. Second, subject to the extent of knowledge spillovers, certain network strategies such as occupying brokerage positions or maximising accessibility to potential partners pay off. Third and most importantly, absorptive capacity plays an important role in network evolution: firms with different network strategies indeed differ in the build-up of absorptive capacity.Keywords: absorptive capacity; agent-based modeling; cognitive distance; dynamics; innovation; knowledge spillovers; networks

“…The function (7) is derived and discussed in Egbetokun and Savin (2012). In short, the function reflects two main empirical findings.…”

Section: Absorptive Capacitymentioning

confidence: 99%

mentioning

confidence: 99%

See 1 more Smart Citation

Emergence of innovation networks from R&D cooperation with endogenous absorptive capacity

Journal of Economic Dynamics and Control

Egbetokun

2016

Self Cite

“…DE belongs to the so-called heuristic optimization approaches [for an overview of these techniques see Gilli and Winker (2009)] and is well acknowledged to be efficient at exploring complex search spaces with multiple local minima, but also for being relatively easy to apply, as it needs little parameter tuning. For applications of DE in finance, risk management and innovation management see Lyra et al (2010), Winker et al (2011) and Egbetokun and Savin (2014) respectively. Applications of DE, but also other heuristics (such as particle swarm optimization), can be also found in the area of optimal control, but mainly in the field of engineering (Cruz et al 2003;Modares and Sistani 2011).…”

Section: Differential Evolutionmentioning

confidence: 99%

No such thing as a perfect hammer: comparing different objective function specifications for optimal control

Blueschke

2016

Cent Eur J Oper Res

Linear-quadratic (LQ) optimization is a fairly standard technique in the optimal control framework. LQ is very well researched, and there are many extensions for more sophisticated scenarios like nonlinear models. Conventionally, the quadratic objective function is taken as a prerequisite for calculating derivative-based solutions of optimal control problems. However, it is not clear whether this framework is as universal as it is considered to be. In particular, we address the question whether the objective function specification and the corresponding penalties applied are well suited in case of a large exogenous shock an economy can experience because of, e.g., the European debt crisis. While one can still efficiently minimize quadratic deviations around policy targets, the economy itself has to go through a period of turbulence with economic indicators, such as unemployment, inflation or public debt, changing considerably over time. We test four alternative designs of the objective function: a least median of squares based approach, absolute deviations, cubic and quartic objective IS acknowledges financial support from the German Science Foundation (DFG RTG 1411), the Helmholtz Association (HIRG-0069) and the Projex CSES, Initiative d'Excellence, Université de Strasbourg. We also thank anonymous referees for very helpful comments and suggestions. The usual disclaimers apply. functions. The analysis is performed based on a small-scale model of the Austrian economy and illustrates a certain trade-off between quickly finding an optimal solution using the LQ technique (reaching defined policy targets) and accounting for alternative objectives, such as limiting volatility in economic performance. As an implication, we argue in favor of the considerably more flexible optimization technique based on heuristic methods (such as Differential Evolution), which allows one to minimize various loss function specifications, but also takes additional constraints into account.

“…This, however, may be a very strong assumption as the choice of the knowledge sources is an endogenous decision of firms in the context of their innovation strategy (see, e.g., Hammerschmidt (2009) and Egbetokun and Savin (2014)). Firm heterogeneity captured by i may drive the choice of the knowledge sources, and therefore, as Cassiman and Veugelers (2006) suggest, it is more efficient to construct predictions of the innovation strategy (choice of knowledge sources) from the first step and employ those instruments in the productivity equation (3) naturally correcting the potential bias in the results (two-step approach).…”

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confidence: 99%

Do Firms Benefit from Complementarity Effect in R&D and What Drives Their R&D Strategy Choices?

Cantner

2014

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. to previous literature, we find the distinct R&D strategy choices to be significant drivers of innovative activity and we identify contextual variables explaining the joint occurrence of the two strategies. Terms of use: Documents in