Dynamic R&D Competition

Gene Grossman and Carl Shapiro

No 1674, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study a simple, two-stage, stochastic patent race involving two firms. We examine the behavior of the participants as they gain the lead or fall behind in the race. We 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. We 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.

Date: 1985-08
Note: PR
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Published as Grossman, Gene M. and Carl Shapiro. "Dynamic R&D Competition," Economic Journal, Vol. 97, No. 386, June 1987.

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