This paper examines the stability of research joint venture when the success of innovative activities is uncertain. While an increase in the likelihood of making a discovery provides firms with an incentive to cooperate, there is a competing incentive to conduct R&D independently. Should the RJV fail to innovate, industry profits are divided among only the successful independent firms. We find that a stable RJV always exists when the industry is large, and that full cooperation of the industry is stable when the likelihood of failure for an industrywide RJV is low.
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Paper provided by Universite Aix-Marseille III in its series G.R.E.Q.A.M. with number
96a33.
Length: 21 pages Date of creation: 1996 Date of revision: Handle: RePEc:fth:aixmeq:96a33
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