An Experimental Analysis of Dynamic Incentives to Share Knowledge

Cary Deck & Nisvan Erkal
Authors registered in the RePEc Author Service: Cary A. Deck (cary.deck@ua.edu) and Nisvan Erkal

No 1083, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: Knowledge sharing arrangements are an important part of the innovation process as they help firms acquire technological capabilities, shorten development time, and spread risk and cost. A question central to the study of knowledge sharing arrangements is the impact of competition on cooperation. While cooperation has the benefit of avoiding duplication, it may have an adverse effect on the competitive advantage of a leading firm. Hence, firms face a difficult challenge during the innovation process while deciding which components of it, if any, to carry out in collaboration with other firms. This paper reports the results of controlled laboratory experiments which identify how the decision to form research joint ventures changes with both relative progress during the R&D process and the intensity of product market competition. The design is based on a modified version of Erkal and Minehart (2008). The results indicate that if expected profits are such that the lagging firms always stay in the race, cooperation unravels as firms move forward in the discovery process and as monopoly profits become relatively more attractive. These results are generally consistent with the theoretical predictions.

Keywords: Experiments; multi-stage R&D; stochastic R&D; cooperative R&D; knowledge (search for similar items in EconPapers)
JEL-codes: C91 D81 L24 O30 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2009
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Related works:
Journal Article: AN EXPERIMENTAL ANALYSIS OF DYNAMIC INCENTIVES TO SHARE KNOWLEDGE (2013)
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