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Strategic R&D with Knowledge Spillovers and Endogenous Time to Complete

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  • Peter M. Kort
  • Ruslan Lukach
  • Joseph Plasmans

Abstract

We present a model where firms make competitive decisions about the optimal duration (or time to build) of their R&D projects. Choosing its project’s duration, the firm can choose to become a leader or a follower, based on its R&D efficiency, the size of the R&D to be carried out and the degree of innovation, which this research will produce. It is shown that asymmetry in R&D efficiency between firms is an important factor determining feasibility of the preemption and attrition scenarios in competitive R&D with time to build. Scenarios of attrition and preemption games are most likely to occur when competitors have similar R&D efficiencies. In case of largely asymmetric firms the games of attrition and preemption are very unlikely, thus the R&D duration choices of firms are determined by the actual trade-off between the benefits of earlier innovation and the costs of faster R&D project completion.

Suggested Citation

  • Peter M. Kort & Ruslan Lukach & Joseph Plasmans, 2007. "Strategic R&D with Knowledge Spillovers and Endogenous Time to Complete," CESifo Working Paper Series 2027, CESifo.
    • Handle: RePEc:ces:ceswps:_2027
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