Stability Analysis of R&D Cooperation in a Supply Chain

Luyun Xu, Dong Liang, Zhenjie Duan and Xu Xiao

Mathematical Problems in Engineering, 2015, vol. 2015, 1-10

Abstract:

R&D outsourcing becomes the often-adopted strategy for firms to innovate. However, R&D cooperation often ends up with failure because of its inherent quality of instability. One of the main reasons for cooperation failure is the opportunistic behavior. As the R&D contract between firms is inherently incomplete, opportunistic behavior always cannot be avoided in the collaborative process. R&D cooperation has been divided into horizontal and vertical types. This paper utilizes game theory to study opportunistic behavior in the vertical R&D cooperation and analyzes the equilibrium of the cooperation. Based on the equilibrium and numerical results, it is found that the vertical R&D cooperation is inherently unstable, and the downstream firm is more likely to break the agreement. The level of knowledge spillovers and the cost of R&D efforts have different effects on firms’ payoffs. When the level of knowledge spillover is low or the cost of R&D efforts is high, mechanisms such as punishment for opportunism may be more effective to guarantee the stability of cooperation.

Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlmpe:409286

DOI: 10.1155/2015/409286

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