Substitutability between internal and external R&D and the paradox of openness

Mário Alexandre Patrício Martins da Silva ()
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Mário Alexandre Patrício Martins da Silva: Faculdade de Economia do Porto

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: We explore how substitutability between internal and external R&D influences business conduct with regard to R&D approaches and their implementation with the support of managerial resources in a competitive innovation game. We develop a duopoly model which incorporates the assumption of substitutability due to managerial diseconomies of scope in firms using different innovation mechanisms to access technology. We establish that firms substitute internal sources of innovation for external sources as exogenous spillovers increase to manage the diseconomies of scope. We find a tension between the knowledge disclosures and the protections of innovation returns that arises as a paradox for firms. The finding of a positive association between the choice of a firm to be connected with the R&D environment and the appropriability of its innovation returns is understood to be consistent with empirical results of a paradox of openness that firms open to external sources of innovation face.

Keywords: Substitutability in R&D; Internal and external R&D; Diseconomies of scope; Managerial attention; Absorptive capacity; Openness. (search for similar items in EconPapers)
JEL-codes: D43 L13 L25 O30 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2022-06
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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:625

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