R&D Networks and Productivity Gaps
Published:Dec 29, 2025 09:45
•1 min read
•ArXiv
Analysis
This paper extends existing R&D network models by incorporating heterogeneous firm productivities. It challenges the conventional wisdom that complete R&D networks are always optimal. The key finding is that large productivity gaps can destabilize complete networks, favoring Positive Assortative (PA) networks where firms cluster by productivity. This has important implications for policy, suggesting that productivity-enhancing policies need to consider their impact on network formation and effort, as these endogenous responses can counteract intended welfare gains.
Key Takeaways
- •Heterogeneous R&D productivities create asymmetric gains in R&D networks.
- •Large productivity gaps can destabilize complete networks.
- •Positive Assortative (PA) networks, where firms cluster by productivity, can be stable.
- •Productivity-enhancing policies should consider their impact on network formation and effort.
Reference
“For sufficiently large productivity gaps, the complete network becomes unstable, whereas the Positive Assortative (PA) network -- where firms cluster by productivity levels -- emerges as stable.”