Abstract
In this paper, a mixed duopoly model is used to explain how ownership structure influences the innovation performances of firms. A three stage-game is adopted in the study. In first stage, firms make R&D expenditure which leads to a profit increasing; in the second stage, firms choose the level of technological improvement they would like to share with the rival; and production quantity will be decided in the final stage. The theory explains that as long as public firms continue their dual roles as productive entities and social safety nets, they cannot be purely profit-oriented, and continue to have poor innovation performance.
Highlights
Mixed duopoly model is a model in which there are one private-sector profit-maximising firm and one public firm pursuing a non-profit objective of social welfare
Firms make R&D expenditure which leads to a profit increasing; in the second stage, firms choose the level of technological improvement they would like to share with the rival; and production quantity will be decided in the final stage
T t ; public firm always achieves less progress than private firm, which indicates that private firm is more efficient in R&D than public firm
Summary
Mixed duopoly model is a model in which there are one private-sector profit-maximising firm and one public firm pursuing a non-profit objective of social welfare. This research focuses on the situation where there is imperfect appropriability of knowledge. This is captured through the existence of R&D spillover. The key result is that while a welfare-maximising public firm will recognize and value the positive externality flowing from its R&D and so choose a minimum level of intellectual protection – maximum spillover. This paper is organized as follows: Section 2, Literature review; Section 3, Set a R&D model of mixed duopoly; Section 4, Present the equilibrium R&D spillover rate, R&D efficiency and R&D investment amount; and Section 5, Concludes the paper
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