Innovation Races with Reward Sharing
The focus in this contribution is on innovative technological races with uncertainty as to who will win a fixed market prize. One firm is the first mover and commits to innovative efforts such as investments in research and development before the followers choose their efforts to win. Perhaps the winner can take the whole prize, but in many cases a sharing of the new market will occur. When market protection is not perfect the winner will have to share the prize with the other players. The analysis is able to clarify the impact of such sharing on the efforts and profitability of the racing participants. It is possible that the first mover will take the number of followers as given. In such a setting with winner takes all, a follower will tend to invest more than the leader (Reinganum, 1985). But this may be reversed with market sharing, in case the pioneer realizes no or low profits from current (older) technologies. The first mover will invest more if he can fully protect his market, while the followers cannot. Sometimes the leader will realize that his efforts may influence the number of followers. With winner takes all it is then the first mover that will provide the largest efforts (Etro, 2004). But market sharing may again turn this around, in case a winning first mover has to share while a winning late mover can keep the whole prize. To understand and to determine innovative efforts in technological races one therefore has to combine information on the sequence of efforts and on the possibilities of market protection.
Volume (Year): LIII (2008)
Issue (Month): 4 ()
|Contact details of provider:|| Postal: Naamsestraat 69, 3000 Leuven|
Web page: http://feb.kuleuven.be/rebel
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ete:revbec:20080401. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (library EBIB)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.