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Cooperation in Product Development and Process R&D Between Competitors

  • M. Bourreau
  • P. Dogan

In this paper, we first provide a simple framework for cooperation in product development between competitors. We put forward the trade-off between the benefits obtained through development cost-sharing and the cost of intensified competition due to reduced product differentiation, which implies that no-cooperation can be an equilibrium outcome. We allow for firms to cooperate partially, i.e., to develop some product components jointly, but not necessarily all components. This enables us to study the factors that may have an effect on the degree of cooperation in product development, both in the presence and in the absence of process R&D. We also analyze the interaction between cooperation decisions on product development and process R&D. By considering a direct link between the two, we show that the degree of cooperation in product development may adversely affect the intensity of cooperation in process R&D.

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Paper provided by Harvard University OpenScholar in its series Working Paper with number 33645.

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Handle: RePEc:qsh:wpaper:33645
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  1. Jon Vilasuso & Mark R. Frascatore, 2000. "Public policy and R&D when research joint ventures are costly," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 818-839, August.
  2. Ghosh, Arghya & Morita, Hodaka, 2008. "An economic analysis of platform sharing," Journal of the Japanese and International Economies, Elsevier, vol. 22(2), pages 164-186, June.
  3. Bester, H. & Petrakis, E., 1991. "The Incentives for Cost Reduction in a Differentiated Industry," Discussion Paper 1991-36, Tilburg University, Center for Economic Research.
  4. Luca Lambertini & Sougata Poddar & Dan Sasaki, 1997. "RJVs in Product Innovation and Cartel Stability," CIE Discussion Papers 1997-13, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  5. Susan Athey & Armin Schmutzler, 1995. "Product and Process Flexibility in an Innovative Environment," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 557-574, Winter.
  6. Mukesh Eswaran & Nancy Gallini, 1996. "Patent Policy and the Direction of Technological Change," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 722-746, Winter.
  7. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-20, December.
  8. Lambertini, Luca & Poddar, Sougata & Sasaki, Dan, 2002. "Research joint ventures, product differentiation, and price collusion," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 829-854, June.
  9. Gamal Atallah, 2004. "The Allocation of Resources to Cooperative and Noncooperative R&D," CIRANO Working Papers 2004s-01, CIRANO.
  10. Bourreau, Marc & Dogan, Pinar, 2007. "Cooperation in Product Development and Process R&D Between Competitors," Working Paper Series rwp07-056, Harvard University, John F. Kennedy School of Government.
  11. Cabral, Luis M. B., 2000. "R&D cooperation and product market competition," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1033-1047, October.
  12. Choi, Jay Pil, 1993. "Cooperative R&D with product market competition," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 553-571.
  13. Luca Lambertini & Francesca Lotti & Enrico Santarelli, 2004. "Infra-industry spillovers and R&D cooperation: Theory and evidence," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(4), pages 311-328.
  14. Bonanno, Giacomo & Haworth, Barry, 1998. "Intensity of competition and the choice between product and process innovation," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 495-510, July.
  15. Arghya Ghosh & Hodaka Morita, 2006. "Platform Sharing in a Differentiated Duopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 397-429, 06.
  16. Rosenkranz, Stephanie, 2003. "Simultaneous choice of process and product innovation when consumers have a preference for product variety," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 183-201, February.
  17. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December.
  18. Kamien, Morton I. & Zang, Israel, 2000. "Meet me halfway: research joint ventures and absorptive capacity," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 995-1012, October.
  19. Lin, Ping & Saggi, Kamal, 2002. "Product differentiation, process R&D, and the nature of market competition," European Economic Review, Elsevier, vol. 46(1), pages 201-211, January.
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