Economic returns in forming stable R&D networks

The aim of this paper is to study the individual and social benefits behind constructing stable R&D networks. We find that the equilibrium outcomes of a stable network are related to the number of competitors. As they increase, the individual outcomes and the total welfare decrease. This implies that in the individual and social perspectives, small stable networks are more desirable than the large ones. Furthermore, when comparing the stability of the components of a network with a complete network, we conclude two main observations. The first observation shows that the stability of the components of a network does not necessarily guarantee a stable overall network. The second observation suggests that firms prefer to be part of a complete network rather than part of a stable component of a network. This preference depends on the profit of firms where it is maximized when firms are belong to the complete network.