Profit-sharing and investment strategies of a one-leader-one-follower R%D alliance with industrialisation risks

Jing Li, Wei Liu and He Zhang

International Journal of Product Development, 2016, vol. 21, issue 2/3, 175-189

Abstract: This paper investigates the profit-sharing and investment strategies for new product development in a one-leader-one-follower R%D alliance while considering the industrialisation risks involved. The long-term value of R%D investment, ROR (rate of return), is used as the decision target by the partners of the alliance. Game models are suggested to inform the decision-making of the R%D alliance. Two cases with different probabilities of industrialisation risks are proposed to demonstrate the different decisions of R%D alliances. The two partners obtain maximal ROR simultaneously under the condition of one case. For the other case, the two partners cannot obtain maximal ROR under the same condition. A dynamic profit-sharing strategy is suggested to manage the R%D alliance. Finally, numerical examples are used to illustrate related issues.

Keywords: innovation; contract design; R%D alliances; profit sharing; game theory; investment strategy; one-leader-one-follower; industrialisation risks; research and development; strategic alliances; R%D investment; RoR; rate of return. (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijpdev:v:21:y:2016:i:2/3:p:175-189

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