Information Sharing and Cumulative Innovation in Business Networks

Gilles Saint-Paul ()

No 4116, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: How can we explain the success of cooperative networks of firms that share innovations, such as Silicon Valley or the Open Source community? This Paper shows that if innovations are cumulative, making an invention publicly available to a network of firms may be valuable if the firm expects to benefit from future improvements made by other firms. A cooperative equilibrium where all innovations are made public is shown to exist under certain conditions. Furthermore, such equilibrium does not rest on punishment strategies being followed after a deviation: it is optimal not to deviate regardless of other firm’s actions following a deviation. A cooperative equilibrium is more likely to arise, the greater the number of firms in the network. When R&D effort is endogenous, cooperative equilibria are associated with strategic complementarities between firms’ research effort, which may lead to multiple equilibria.

Keywords: cooperation; cumulative knowledge; growth; information sharing; innovation; open source; R&D; silicon valley; technical progress (search for similar items in EconPapers)
JEL-codes: O30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-tid
Date: 2003-11
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