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R&D Cooperation or Competition in the Presence of Cannibalization

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  • Paul Belleflamme

    (Queen Mary and Westfield College, University of London)

Abstract

R&D cooperation is reconsidered in situations where firms direct R&D activities towards a new product that cannibalizes the firms' existing products. For soft cannibalization, the welfare-maximizing arrangement between firms involves, for low R&D costs, the formation of a separate entity that independently chooses both the output level of the new good and the level of R&D expenditures and otherwise, joint decisions about R&D but independent decisions about production. Yet, as cannibalization increases, firms find it unprofitable to market the new good unless they collaborate more narrowly. Merger should then be permitted for the socially desirable introduction of the new good.

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Bibliographic Info

Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 413.

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Date of creation: Jun 2000
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Handle: RePEc:qmw:qmwecw:wp413

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Keywords: R&D cooperation; Joint ventures; Cannibalization;

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  1. Paul Belleflamme & Francis Bloch, 2000. "Optimal Ownership Structures in Asymmetric Joint Ventures," Working Papers 411, Queen Mary, University of London, School of Economics and Finance.
  2. Bensaid, Bernard & Encaoua, David & Winckler, Antoine, 1994. "Competition, cooperation and mergers: Economic and policy issues," European Economic Review, Elsevier, vol. 38(3-4), pages 637-650, April.
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