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Cooperation in Product Development and Process R&D Between Competitors

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  • Bourreau, Marc

    (ENST and CREST-LEI)

  • Dogan, Pinar

    (Harvard U)

Abstract

In this paper, we first provide a simple framework for cooperation in product development between competitors. We put forward the tradeoff between the benefits obtained through development cost sharing and the cost of intensified competition due to reduced product differentiation, which implies that no cooperation can be an equilibrium outcome. We also allow for firms to cooperate partially, i.e., to develop some product components jointly, but not necessarily all. This enables us to study the factors that may have an effect on the degree of cooperation in product development, both in the presence and in the absence of process R&D. We also analyze the interaction between cooperation decisions on product development and process R&D. Considering a direct link between the two, we show that the degree of cooperation in product development may adversely affect the intensity of cooperation in process R&D.

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Bibliographic Info

Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp07-056.

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Date of creation: Nov 2007
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Handle: RePEc:ecl:harjfk:rwp07-056

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References

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  1. Luca Lambertini & Sougata Poddar & Dan Sasaki, 1997. "RJVs in Product Innovation and Cartel Stability," CIE Discussion Papers 1997-13, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  2. Bourreau, Marc & Dogan, Pinar, 2010. "Cooperation in Product Development and Process R&D Between Competitors," Scholarly Articles 4863170, Harvard Kennedy School of Government.
  3. Gamal Atallah, 2004. "The Allocation of Resources to Cooperative and Noncooperative R&D," Working Papers 0403E, University of Ottawa, Department of Economics.
  4. Lambertini, Luca & Poddar, Sougata & Sasaki, Dan, 2002. "Research joint ventures, product differentiation, and price collusion," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 829-854, June.
  5. Bester, H. & Petrakis, E., 1991. "The Incentives for Cost Reduction in a Differentiated Industry," Discussion Paper 1991-36, Tilburg University, Center for Economic Research.
  6. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December.
  7. Lin, Ping & Saggi, Kamal, 2002. "Product differentiation, process R&D, and the nature of market competition," European Economic Review, Elsevier, vol. 46(1), pages 201-211, January.
  8. Choi, Jay Pil, 1993. "Cooperative R&D with product market competition," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 553-571.
  9. Jon Vilasuso & Mark R. Frascatore, 2000. "Public policy and R&D when research joint ventures are costly," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 818-839, August.
  10. Luca Lambertini & Francesca Lotti & Enrico Santarelli, 2004. "Infra-industry spillovers and R&D cooperation: Theory and evidence," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(4), pages 311-328.
  11. Kamien, Morton I. & Zang, Israel, 2000. "Meet me halfway: research joint ventures and absorptive capacity," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 995-1012, October.
  12. Arghya Ghosh & Hodaka Morita, 2007. "An Economic Analysis of Platform Sharing," NBER Working Papers 13058, National Bureau of Economic Research, Inc.
  13. Rosenkranz, Stephanie, 2003. "Simultaneous choice of process and product innovation when consumers have a preference for product variety," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 183-201, February.
  14. Bonanno, Giacomo & Haworth, Barry, 1998. "Intensity of competition and the choice between product and process innovation," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 495-510, July.
  15. Arghya Ghosh & Hodaka Morita, 2006. "Platform Sharing in a Differentiated Duopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 397-429, 06.
  16. Cabral, Luis M. B., 2000. "R&D cooperation and product market competition," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1033-1047, October.
  17. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-20, December.
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Citations

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Cited by:
  1. M. Bourreau & P. Dogan & M. Manant, . "Size of RJVs and Degree of Cooperation in Product Development," Working Paper 33657, Harvard University OpenScholar.
  2. Thomas Jeitschko & Nanyun Zhang, 2011. "Patent Pools and Product Development," Working Papers 2011-02, Towson University, Department of Economics, revised Feb 2011.
  3. Bourreau, Marc & Dogan, PInar, 2010. "Cooperation in product development and process R&D between competitors," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 176-190, March.
  4. Petal Jean Hackett, 2012. "Cutting too Close? Design Protection and Innovation in Fashion Goods," CESifo Working Paper Series 3716, CESifo Group Munich.
  5. Jeitschko Thomas D. & Zhang Nanyun, 2014. "Adverse Effects of Patent Pooling on Product Development and Commercialization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 14(1), pages 31, January.
  6. Dawid, H. & Kopel, M. & Kort, P.M., 2013. "R&D competition versus R&D cooperation in oligopolistic markets with evolving structure," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 527-537.

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