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Optimal Sharing Strategies in Dynamic Games of Research and Development

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  • Nisvan Erkal
  • Deborah Minehart

Abstract

This paper builds a theoretical foundation for the dynamics of knowledge sharing in private industry. In practice, research and development projects can take years or even decades to complete. We model an uncertain research process, where research projects consist of multiple sequential steps. We ask how the incentives to license intermediate steps to rivals change over time as the research project approaches maturity and the uncertainty that the firms face decreases. Such a dynamic approach allows us to analyze the interaction between how close the firms are to product market competition and how intense that competition is. If product market competition is relatively moderate, the lagging firm is expected never to drop out and the incentives to share intermediate research outcomes decreases monotonically with progress. However, if product market competition is relatively intense, the incentives to share may increase with progress. These results illustrate under what circumstances it is necessary to have policies aimed at encouraging cooperation in R&D and when such policies should be directed towards early vs. later stage research

Suggested Citation

  • Nisvan Erkal & Deborah Minehart, 2008. "Optimal Sharing Strategies in Dynamic Games of Research and Development," Department of Economics - Working Papers Series 1038, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:1038
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    References listed on IDEAS

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    Cited by:

    1. Jeitschko Thomas D. & Zhang Nanyun, 2014. "Adverse Effects of Patent Pooling on Product Development and Commercialization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 14(1), pages 1-31, January.
    2. Cabral, Luís & Salant, David, 2014. "Evolving technologies and standards regulation," International Journal of Industrial Organization, Elsevier, vol. 36(C), pages 48-56.
    3. Cary Deck & Nisvan Erkal, 2013. "An Experimental Analysis Of Dynamic Incentives To Share Knowledge," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1622-1639, April.
    4. Thomas Jeitschko & Nanyun Zhang, 2011. "Patent Pools and Product Development," Working Papers 2011-02, Towson University, Department of Economics, revised Feb 2011.

    More about this item

    Keywords

    Multi-stage R&D; innovation; knowledge sharing; licensing; dynamic games;

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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