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Profit-enhancing know-how disclosure: A strategic view

Author

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  • Noriaki Matsushima

    (Graduate School of Business Administration, Kobe University)

  • Susumu Ogawa

    (Graduate School of Business Administration, Kobe University)

Abstract

In general, the disclosure of know-how and technological knowledge could harm the disclosing firm. Firms, however, often share their know-how freely and yet enhance their profits. We provide a theoretical framework and a new insight into know-how disclosure. We consider a multiproduct oligopolistic market in which an incumbent firm that can disclose its cost-reducing know-how and several new entrants exist. Each firm supplies products in two separate markets. The incumbent firm has already allocated its production resources to one market (market A) and discloses its know-how concerning production in market A. We show that the disclosure of know-how for cost reduction can enhance the profit of the incumbent (the disclosing) firm. Using the disclosed know-how, the entrants can produce for a low cost in market A and allocate their production resources to the other market. As a result, competition in market A is less severe than that in the case in which the incumbent does not disclose its know-how. We also provide several extensions of the basic scenario.

Suggested Citation

  • Noriaki Matsushima & Susumu Ogawa, 2007. "Profit-enhancing know-how disclosure: A strategic view," Discussion Papers 2007-02, Kobe University, Graduate School of Business Administration.
    • Handle: RePEc:kbb:dpaper:2007-02
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    Cited by:

    1. Shohei Yoshida & Cong Pan, 2015. "Technology Transfer in the Market with Heterogeneous Consumers," ISER Discussion Paper 0953, Institute of Social and Economic Research, Osaka University.
    2. Shohei Yoshida, 2015. "Multiproduct competition in vertically related industries," ISER Discussion Paper 0935, Institute of Social and Economic Research, Osaka University.

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    More about this item

    Keywords

    know-how; disclosure; resource allocation; multiproduct firms;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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