Dynamic R&D Competition

Gene Grossman and Carl Shapiro

Economic Journal, 1987, vol. 97, issue 386, 372-87

Abstract: The authors study a simple, two-stage, stochastic patent race involving two firms. They examine the behavior of the participants as they gain the lead or fall behind in the race. The authors find that the leader engages in R&D more intensively than does the follower, and that both firms intensify their efforts if the follower does catch up with the leader. They also analyze: (1) the attractiveness of licensing, whereby the leader shares his results with the follower; (2) a policy of issuing patents for intermediate research results; and (3) the effects of research joint ventures, whereby the firms coordinate their initial research efforts and share their results. Copyright 1987 by Royal Economic Society.

Date: 1987
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Working Paper: Dynamic R&D Competition (1985)
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