One-Way Spillovers, Endogenous Innovator/Imitator Roles and Research Jointventures

We consider a two-period duopoly characterized by a one-way spillover structure in process R&D and a very broad specification of product market competition. We show that a priori identical firms always engage in different levels of R&D, at equilibrium, thus giving rise to an innovator/imitator configuration and ending up with different sizes. In view of this endogenous firm heterogeneity, the social benefits of, and the firms´ incentives for, research joint ventures are somewhat different from the case of ex post firm symmetry. The key properties of the game are submodularity (R&D decisions are strategic substitutes) and lack of global concavity.