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Effects of Idiosyncratic Investments in Collaborative Networks: An Experimental Analysis

In: Experimental Business Research

Author

Listed:
  • Wilfred Amaldoss

    (Duke University)

  • Amnon Rapoport

    (University of Arizona
    Hong Kong University of Science and Technology)

Abstract

There has been an increase in the incidence of firms who collaborate to develop and market new products. Partners in these collaborations often make investments that are idiosyncratic to the collaboration and have limited value outside the scope of the alliance. Amaldoss and Rapoport (2003) reports that the joint investment of a network does not decrease if the number of partners increases. Specifically, if the investments are only partially idiosyncratic, the joint investment increases as a network grows in size. If they are fully idiosyncratic, then the joint investments are predicted to be independent of the number of partners. In this paper, we test these predictions in a laboratory setting. The experimental results support the qualitative predictions of the model, and adaptive learning accounts for the investment patterns of our subjects over time. We also extend the model to consider competitions among more than two networks.

Suggested Citation

  • Wilfred Amaldoss & Amnon Rapoport, 2005. "Effects of Idiosyncratic Investments in Collaborative Networks: An Experimental Analysis," Springer Books, in: Rami Zwick & Amnon Rapoport (ed.), Experimental Business Research, chapter 0, pages 81-112, Springer.
    • Handle: RePEc:spr:sprchp:978-0-387-24244-6_4
    DOI: 10.1007/0-387-24244-9_4
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    Cited by:

    1. Wilfred Amaldoss & Amnon Rapoport, 2005. "Collaborative Product and Market Development: Theoretical Implications and Experimental Evidence," Marketing Science, INFORMS, vol. 24(3), pages 396-414, February.

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