Contracting Institutions and R&D Collaboration Between Nonrivals in Competitive Industry Equilibrium

Travis Ng

Managerial and Decision Economics, 2025, vol. 46, issue 6, 3414-3427

Abstract: In a duopoly model, one firm has the option to collaborate in R&D with a third party. Although collaboration can expedite innovation, the third party may unintentionally leak the innovation to the rival firm. Engaging in R&D collaboration can make the rival firm anticipate a free ride, which weakens its incentives for R&D spending. The firm can take legal action against the third party in case of information leakage. Strengthening contracting institutions improves the likelihood of success in such cases. In a competitive industry equilibrium, strengthening contracting institutions only sometimes increases R&D collaboration, industry R&D spending, and the innovation rate.

Date: 2025
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https://doi.org/10.1002/mde.4536

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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:46:y:2025:i:6:p:3414-3427

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