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Information Sharing and Cumulative Innovation in Business Networks

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  • Saint-Paul, Gilles

Abstract

How can we explain the success of cooperative networks of firms that share innovations, such as Silicon Valley or the Open Source community? This Paper shows that if innovations are cumulative, making an invention publicly available to a network of firms may be valuable if the firm expects to benefit from future improvements made by other firms. A cooperative equilibrium where all innovations are made public is shown to exist under certain conditions. Furthermore, such equilibrium does not rest on punishment strategies being followed after a deviation: it is optimal not to deviate regardless of other firm’s actions following a deviation. A cooperative equilibrium is more likely to arise, the greater the number of firms in the network. When R&D effort is endogenous, cooperative equilibria are associated with strategic complementarities between firms’ research effort, which may lead to multiple equilibria.

Suggested Citation

  • Saint-Paul, Gilles, 2003. "Information Sharing and Cumulative Innovation in Business Networks," CEPR Discussion Papers 4116, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4116
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    Citations

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    Cited by:

    1. Gerlach, Heiko & Rønde, Thomas & Stahl, Konrad, 2009. "Labor pooling in R&D intensive industries," Journal of Urban Economics, Elsevier, vol. 65(1), pages 99-111, January.
    2. Werner Bönte & Lars Wiethaus, 2007. "Knowledge Disclosure and Transmission in Buyer–Supplier Relationships," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 31(4), pages 275-288, December.
    3. Gamal Atallah, 2007. "Research Joint Ventures with Asymmetric Spillovers and Symmetric Contributions," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 16(7), pages 559-586.
    4. Thorsten Wichmann & Pio Baake, 2003. "Open Source Software, Competition and Potential Entry," Berlecon Research Papers 0005, Berlecon Research.

    More about this item

    Keywords

    cooperation; cumulative knowledge; growth; information sharing; innovation; open source; R&D; silicon valley; technical progress;

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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