Modeling the formation of R\&D alliances: An agent-based model with empirical validation

TL;DR

This paper presents an agent-based model for R&D alliance formation, validated with empirical data, revealing that high-fitness firms tend to form larger alliances, and offers an analytical solution to reduce simulation efforts.

Contribution

The paper introduces a calibrated agent-based model with an analytical solution for alliance formation, validated against extensive empirical data, and applicable to various utility functions.

Findings

High-fitness firms attract more partners and form larger alliances.

The model accurately reproduces the empirical size distribution of alliances.

An analytical solution reduces computational effort significantly.

Abstract

We develop an agent-based model to reproduce the size distribution of R\&D alliances of firms. Agents are uniformly selected to initiate an alliance and to invite collaboration partners. These decide about acceptance based on an individual threshold that is compared with the utility expected from joining the current alliance. The benefit of alliances results from the fitness of the agents involved. Fitness is obtained from an empirical distribution of agent's activities. The cost of an alliance reflects its coordination effort. Two free parameters $a_{c}$ and $a_{l}$ scale the costs and the individual threshold. If initiators receive $R$ rejections of invitations, the alliance formation stops and another initiator is selected. The three free parameters $(a_{c},a_{l},R)$ are calibrated against a large scale data set of about 15,000 firms engaging in about 15,000 R\&D alliances over 26 years. For the validation of the model we compare the empirical size distribution with the theoretical one, using confidence bands, to find a very good agreement. As an asset of our agent-based model, we provide an analytical solution that allows to reduce the simulation effort considerably. The analytical solution applies to general forms of the utility of alliances. Hence, the model can be extended to other cases of alliance formation. While no information about the initiators of an alliance is available, our results indicate that mostly firms with high fitness are able to attract newcomers and to establish larger alliances.