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Dynamic R&D Competition

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  • Grossman, Gene M
  • Shapiro, Carl

Abstract

The authors study a simple, two-stage, stochastic patent race involving two firms. They examine the behavior of the participants as they gain the lead or fall behind in the race. The authors 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. They 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. Copyright 1987 by Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 97 (1987)
Issue (Month): 386 (June)
Pages: 372-87

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Handle: RePEc:ecj:econjl:v:97:y:1987:i:386:p:372-87

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References

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  1. Kenneth L. Judd, 1985. "Closed-Loop Equilibrium in a Multi-Stage Innovation Race," Discussion Papers 647, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Reinganum, Jennifer F., 1981. "Dynamic games of innovation," Journal of Economic Theory, Elsevier, vol. 25(1), pages 21-41, August.
  3. Shapiro, Carl, 1985. "Patent Licensing and R&D Rivalry," American Economic Review, American Economic Association, vol. 75(2), pages 25-30, May.
  4. Harris, Christopher & Vickers, John, 1985. "Perfect Equilibrium in a Model of a Race," Review of Economic Studies, Wiley Blackwell, vol. 52(2), pages 193-209, April.
  5. Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June.
  6. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March.
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Citations

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Cited by:
  1. Cozzi, Guido & Galli, Silvia, 2011. "Upstream innovation protection: common law evolution and the dynamics of wage inequality," MPRA Paper 31902, University Library of Munich, Germany.
  2. Alexandre Gaudeul, 2004. "Open Source Software Development Patterns and License Terms," Industrial Organization 0409008, EconWPA.
  3. Jay Pil Choi, 2002. "A Dynamic Analysis of Licensing: The "Boomerang" Effect and Grant-Back Clauses," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 203-229, August.
  4. Alka Chadha & Åke Blomqvist, 2005. "Patent Races, “Me-Too” Drugs, and Generics: A Developing-World Perspective," Departmental Working Papers wp0513, National University of Singapore, Department of Economics.
  5. Fershtman, Chaim & Kamien, Morton I., 1992. "Cross licensing of complementary technologies," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 329-348, September.
  6. Leandro Arozamena & Estelle Cantillon, 2004. "Investment Incentives in Procurement Auctions," Review of Economic Studies, Wiley Blackwell, vol. 71(1), pages 1-18, 01.
  7. Michael Peneder & Martin Wörter, 2013. "Competition, R&D and Innovation: Testing the Inverted-U in a Simultaneous System," WIFO Working Papers 448, WIFO.
  8. Tucci, Christopher L. (Christopher Luigi) & Cusumano, Michael A., 1954-, 1994. "Benefits and pitfalls of international strategic technology alliances," Working papers 3706-94. WP (Internationa, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  9. Daron Acemoglu, 2007. "Equilibrium Bias of Technology," Econometrica, Econometric Society, vol. 75(5), pages 1371-1409, 09.
  10. Nguyen, Thang, 2004. "Technological Progress in Races for Product Supremacy," MPRA Paper 235, University Library of Munich, Germany, revised 18 Jul 2006.
  11. Cozzi, Guido & Galli, Silvia, 2011. "Privatization of Knowledge: Did the U.S. Get It Right? (New Version)," MPRA Paper 29710, University Library of Munich, Germany.
  12. David Gill, 2008. "Strategic Disclosure of Intermediate Research Results," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(3), pages 733-758, 09.
  13. Aikaterini Kokkinou, 2005. "Entrepreneurship, Innovation Activities and Regional Growth," ERSA conference papers ersa05p419, European Regional Science Association.
  14. Zschocke, Mark S. & Mantin, Benny & Jewkes, Elizabeth M., 2013. "Mature or emerging markets: Competitive duopoly investment decisions," European Journal of Operational Research, Elsevier, vol. 228(3), pages 612-622.

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