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R&D Competition with Asymmetric Firms

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  • Poyago-Theotoky, Joanna

Abstract

This paper considers a nontournament duopoly model of process innovation. Costs of production can be reduced by firms spending on R&D. Firms are asymmetric in the sense that they may differ in their initial costs of production . It is shown that the high-cost firm may spend more (or less) in R&D than its low-cost rival. This main result is dependent on the relative magnitude of two important forces: the incentive effect, whereby the low-cost firm always has a stronger incentive to spend on cost-reducing R&D, and the effectiveness factor, which favors the high-cost firm. Copyright 1996 by Scottish Economic Society.

Suggested Citation

  • Poyago-Theotoky, Joanna, 1996. "R&D Competition with Asymmetric Firms," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(3), pages 334-342, August.
    • Handle: RePEc:bla:scotjp:v:43:y:1996:i:3:p:334-42
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    Cited by:

    1. Banerjee, Dyuti & Chatterjee, Ishita, 2010. "The impact of piracy on innovation in the presence of technological and market uncertainty," Information Economics and Policy, Elsevier, vol. 22(4), pages 391-397, December.
    2. Joshi, Sumit & Vonortas, Nicholas S., 2001. "Convergence to symmetry in dynamic strategic models of R&D: The undiscounted case," Journal of Economic Dynamics and Control, Elsevier, vol. 25(12), pages 1881-1897, December.
    3. Joanna Poyago-Theotoky & Khemarat Talerngsri Teerasuwannajak, 2009. "R&D Productivity and Intellectual Property Rights Protection Regimes," Discussion Paper Series 2009_06, Department of Economics, Loughborough University, revised Mar 2009.
    4. Marc Escrihuela-Villar, 2008. "Innovation And Market Concentration With Asymmetric Firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 17(3), pages 195-207.
    5. Pedro P. Barros & Tore Nilssen, 1999. "Industrial Policy and Firm Heterogeneity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 597-616, December.
    6. Gamal Atallah, 2002. "Vertical R&D Spillovers, Cooperation, Market Structure, and Innovation," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(3), pages 179-209.
    7. Andrew McKay & Oliver Morrissey & Charlotte Vaillant, 1998. "Aggregate Export and Food Crop Supply Response in Tanzania," Discussion Papers 98/4, University of Nottingham, CREDIT.
    8. Luis Granero & Juan Carlos Reboredo, 2006. "Competition and R&D in retail banking under expense preference behaviour," Applied Economics Letters, Taylor & Francis Journals, vol. 13(1), pages 47-50.
    9. Pedro P. Barros & Tore Nilssen, 1999. "The Effect of Firm Heterogeneity on R&D Competition," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 25, pages 87-93.
    10. Chang, Yang-Ming & Walter, Jason, 2015. "Digital piracy: Price-quality competition between legal firms and P2P network hosts," Information Economics and Policy, Elsevier, vol. 31(C), pages 22-32.
    11. Matthew R. Roelofs & Stein E. Østbye & Eirik E. Heen, 2017. "Asymmetric firms, technology sharing and R&D investment," Experimental Economics, Springer;Economic Science Association, vol. 20(3), pages 574-600, September.

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