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Profit-sharing and investment strategies of a one-leader-one-follower R%D alliance with industrialisation risks

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  • Jing Li
  • Wei Liu
  • He Zhang

Abstract

This paper investigates the profit-sharing and investment strategies for new product development in a one-leader-one-follower R%D alliance while considering the industrialisation risks involved. The long-term value of R%D investment, ROR (rate of return), is used as the decision target by the partners of the alliance. Game models are suggested to inform the decision-making of the R%D alliance. Two cases with different probabilities of industrialisation risks are proposed to demonstrate the different decisions of R%D alliances. The two partners obtain maximal ROR simultaneously under the condition of one case. For the other case, the two partners cannot obtain maximal ROR under the same condition. A dynamic profit-sharing strategy is suggested to manage the R%D alliance. Finally, numerical examples are used to illustrate related issues.

Suggested Citation

  • Jing Li & Wei Liu & He Zhang, 2016. "Profit-sharing and investment strategies of a one-leader-one-follower R%D alliance with industrialisation risks," International Journal of Product Development, Inderscience Enterprises Ltd, vol. 21(2/3), pages 175-189.
    • Handle: RePEc:ids:ijpdev:v:21:y:2016:i:2/3:p:175-189
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    Cited by:

    1. Lütkemeyer, Daniel & Heese, H. Sebastian & Wuttke, David A. & Gernert, Andreas K., 2022. "Pricing and market entry decisions in personalized medicine," International Journal of Production Economics, Elsevier, vol. 253(C).
    2. Lütkemeyer, Daniel & Heese, H. Sebastian & Wuttke, David A., 2021. "Overcoming inefficiencies in the development of personalized medicine," European Journal of Operational Research, Elsevier, vol. 290(1), pages 278-296.
    3. Muhammad Fahimullah & Yasir Faheem & Naveed Ahmad, 2019. "A bi-objective game-theoretic model for collaboration formation between software development firms," PLOS ONE, Public Library of Science, vol. 14(7), pages 1-19, July.

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