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Information Sharing and Cumulative Innovation in Business Networks

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Saint-Paul, Gilles

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Abstract

How can we explain the success of cooperative networks of firms that share innovations, such as Silicon Valley or the Open Source community? This Paper shows that if innovations are cumulative, making an invention publicly available to a network of firms may be valuable if the firm expects to benefit from future improvements made by other firms. A cooperative equilibrium where all innovations are made public is shown to exist under certain conditions. Furthermore, such equilibrium does not rest on punishment strategies being followed after a deviation: it is optimal not to deviate regardless of other firm’s actions following a deviation. A cooperative equilibrium is more likely to arise, the greater the number of firms in the network. When R&D effort is endogenous, cooperative equilibria are associated with strategic complementarities between firms’ research effort, which may lead to multiple equilibria.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4116.

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Date of creation: Nov 2003
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Handle: RePEc:cpr:ceprdp:4116

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Related research
Keywords: cooperation; cumulative knowledge; growth; information sharing; innovation; open source; R&D; silicon valley; technical progress;

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Find related papers by JEL classification:
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General

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  1. Heiko Gerlach & Thomas Rønde & Konrad O. Stahl, 2005. "Labor Pooling in R&D Intensive Industries," Discussion Papers 64, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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  2. Thorsten Wichmann & Pio Baake, 2003. "Open Source Software, Competition and Potential Entry," Berlecon Research Papers 0005, Berlecon Research. [Downloadable!]
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