The competition--innovation debate: is R&D cooperation the answer?

Stein E. Østbye and Matthew R. Roelofs

Economics of Innovation and New Technology, 2013, vol. 22, issue 2, 153-176

Abstract: Firms’ investment in research and development (R&D) depends on both product market competition and R&D cooperation. In this paper, we use a simple duopoly model of product innovation to show that firms should choose to enter into different cooperative R&D arrangements depending on competition. Equilibrium behavior implies different competition--innovation relationships conditional on the nature of the cooperative arrangements that firms join. Therefore, variation in the set of feasible modes of cooperation may explain why different competition--innovation relationships are observed in empirical studies based on field data. Experimental evidence confirms the presence of similar incentives for cooperating despite some deviations from predicted values of R&D.

Date: 2013
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DOI: 10.1080/10438599.2012.724908

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