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<p>When firms undertake environmental R&amp;D (ERD) for pollution abatement, many industries exhibit either simultaneous or lagged investment decisions among competitors. However, existing literature treats the timing of ERD competition as exogenous, without exploring which occurs endogenously. This study addresses this gap by investigating the endogenous timing of ERD competition under environmental taxation. We analyze duopolistic firms undertaking end-of-pipe ERD, focusing on how asymmetric capacity to absorb spillovers from rivals’ ERD influences endogenous timing. Additionally, by distinguishing spillovers into scale and heterogeneity, we explore which effect more likely influences timing decisions. The results show that asymmetric ERD spillovers can result in both simultaneous and sequential ERD competition as endogenous timing outcomes. When ERD spillovers are homogeneous, simultaneous ERD competition is more likely to occur; with heterogeneous spillovers, sequential ERD competition may also occur. We also find that among various timing scenarios, economically optimal timing can be achieved, though these scenarios may differ. Interestingly, when socially optimal ERD timing occurs, total emissions tend to be high, and economic welfare low.</p>

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On firms’ asymmetric spillovers and endogenous timing in environmental R&D abatement

  • 期刊论文

  • 发表日期：

    2026年3月23日

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  • Keita Yamane

摘要

When firms undertake environmental R&D (ERD) for pollution abatement, many industries exhibit either simultaneous or lagged investment decisions among competitors. However, existing literature treats the timing of ERD competition as exogenous, without exploring which occurs endogenously. This study addresses this gap by investigating the endogenous timing of ERD competition under environmental taxation. We analyze duopolistic firms undertaking end-of-pipe ERD, focusing on how asymmetric capacity to absorb spillovers from rivals’ ERD influences endogenous timing. Additionally, by distinguishing spillovers into scale and heterogeneity, we explore which effect more likely influences timing decisions. The results show that asymmetric ERD spillovers can result in both simultaneous and sequential ERD competition as endogenous timing outcomes. When ERD spillovers are homogeneous, simultaneous ERD competition is more likely to occur; with heterogeneous spillovers, sequential ERD competition may also occur. We also find that among various timing scenarios, economically optimal timing can be achieved, though these scenarios may differ. Interestingly, when socially optimal ERD timing occurs, total emissions tend to be high, and economic welfare low.