The effects of competition on the R&D portfolios of multiproduct firms

Ping Lin and Wen Zhou

International Journal of Industrial Organization, 2013, vol. 31, issue 1, 83-91

Abstract: We investigate the R&D portfolio choices of multiproduct firms. When a firm increases cost-reducing R&D investment in a given product, its rivals will modify their entire R&D portfolios by reducing R&D investments in that particular product and increasing R&D investments in other competing products. Our analysis demonstrates that R&D portfolios will be more specialized when firms face greater competition, which will be the case if products become closer substitutes, a monopolist begins to face competition from a rival firm, or firms compete on price rather than quantity. R&D cooperation allows firms to internalize the negative externalities of their R&D investments in two ways: by reducing such investments across all products and by increasingly focusing their R&D portfolios on different products. Firms may completely shut down a subset of their R&D projects under R&D cooperation if the products concerned are sufficiently close substitutes.

Keywords: R&D portfolio; Multiproduct firms; Cross-market effect; R&D cooperation (search for similar items in EconPapers)
JEL-codes: L13 O31 O32 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:31:y:2013:i:1:p:83-91

DOI: 10.1016/j.ijindorg.2012.11.003

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