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An Experimental Analysis of Dynamic Incentives to Share Knowledge

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  • Cary Deck & Nisvan Erkal

Abstract

Knowledge sharing arrangements are an important part of the innovation process as they help firms acquire technological capabilities, shorten development time, and spread risk and cost. A question central to the study of knowledge sharing arrangements is the impact of competition on cooperation. While cooperation has the benefit of avoiding duplication, it may have an adverse effect on the competitive advantage of a leading firm. Hence, firms face a difficult challenge during the innovation process while deciding which components of it, if any, to carry out in collaboration with other firms. This paper reports the results of controlled laboratory experiments which identify how the decision to form research joint ventures changes with both relative progress during the R&D process and the intensity of product market competition. The design is based on a modified version of Erkal and Minehart (2008). The results indicate that if expected profits are such that the lagging firms always stay in the race, cooperation unravels as firms move forward in the discovery process and as monopoly profits become relatively more attractive. These results are generally consistent with the theoretical predictions.

Suggested Citation

  • Cary Deck & Nisvan Erkal, 2009. "An Experimental Analysis of Dynamic Incentives to Share Knowledge," Department of Economics - Working Papers Series 1083, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:1083
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    Cited by:

    1. Basant, Rakesh & Rai, Rajnish, 2013. "Alliance Capability, Governance Mechanisms And Stakeholder Management In Complex Settings," IIMA Working Papers WP2013-05-10, Indian Institute of Management Ahmedabad, Research and Publication Department.
    2. repec:kap:expeco:v:20:y:2017:i:3:d:10.1007_s10683-016-9500-5 is not listed on IDEAS
    3. Cary Deck & Erik O. Kimbrough, 2016. "Experimenting with Contests for Experimentation," Discussion Papers dp16-08, Department of Economics, Simon Fraser University.
    4. Nisvan Erkal & Deborah Minehart, 2013. "Optimal Sharing Strategies in Dynamic," Department of Economics - Working Papers Series 1174, The University of Melbourne.
    5. Engel, Christoph & Kleine, Marco, 2015. "Who is afraid of pirates? An experiment on the deterrence of innovation by imitation," Research Policy, Elsevier, vol. 44(1), pages 20-33.

    More about this item

    Keywords

    Experiments; multi-stage R&D; stochastic R&D; cooperative R&D; knowledge;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • 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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