R&D Collaboration Networks in Mixed Oligopoly

We develop a model of endogenous network formation in order to examine the incentives for R&D collaboration in a mixed oligopoly. Our analysis reveals that the complete network, where each firm collaborates with all others, is uniquely stable, industry-profit maximizing and efficient. This result is in contrast with earlier contributions in private oligopoly where under strong market rivalry a conflict between stable and efficient networks is likely to occur. A key finding of the paper is that state-owned enterprises may be used as policy instruments in tackling the potential conflict between individual and collective incentives for R&D collaboration.