Upstream and downstream horizontal R&D networks

The existing literature on R&D networks has focused on networks among firms who compete in the product market (downstream networks). This article develops the literature by casting the analysis in the context of a vertically related industry, where both downstream firms and their upstream suppliers can form horizontal R&D networks. Our analysis suggests that economic factors, such as within-network R&D spillovers, may be the driving forces behind the equilibrium network formations. Moreover, the equilibrium upstream R&D network may have the same architecture as the downstream R&D network or may differ from it. Interestingly, we find that stable networks can be socially optimal, but only in the case where their architectures differ across market tiers. (C) 2012 Elsevier B.V. All rights reserved.