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Open Innovation in a dynamic cournot duopoly

  • Hasnas, Irina
  • Lambertini, Luca
  • Palestini, Arsen

In recent years Open Innovation (OI) processes have been receiving growing attention from the empirical and theoretical economic literature, where a debate is taking place on the aspects of complementarity or substitutability between internal R&D and OI spillover. By means of a differential game approach, we analyze the case of substitutability in an OI setup in a Cournot duopoly where knowledge spillovers are endogenously determined via the R&D process. The game produces multiple steady states, allowing for an asymmetric solution where a firm may trade off the R&D investment against information absorption from the rival. The technical analysis and the numerical simulations point out that the firm which commits to a higher level of OI absorption produces a smaller output and enjoys higher profits than its rival.

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Paper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 111.

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Date of creation: 2013
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Handle: RePEc:zbw:dicedp:111
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  1. Drechsler, Wenzel & Natter, Martin, 2012. "Understanding a firm's openness decisions in innovation," Journal of Business Research, Elsevier, vol. 65(3), pages 438-445.
  2. Cellini, Roberto & Lambertini, Luca, 2002. "A differential game approach to investment in product differentiation," Journal of Economic Dynamics and Control, Elsevier, vol. 27(1), pages 51-62, November.
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  7. Suzanne Scotchmer, 2010. "Openness, Open Source, and the Veil of Ignorance," American Economic Review, American Economic Association, vol. 100(2), pages 165-71, May.
  8. Dirk Czarnitzki & Kornelius Kraft, 2012. "Spillovers of innovation activities and their profitability," Oxford Economic Papers, Oxford University Press, vol. 64(2), pages 302-322, April.
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  13. Lokshin, Boris & Belderbos, René & Carree, Martin, 2007. "The Productivity Effects of Internal and External R&D: Evidence From a Dynamic Panel Data Model," MERIT Working Papers 026, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
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  15. Caulkins, Jonathan P. & Feichtinger, Gustav & Grass, Dieter & Hartl, Richard F. & Kort, Peter M. & Seidl, Andrea, 2013. "When to make proprietary software open source," Journal of Economic Dynamics and Control, Elsevier, vol. 37(6), pages 1182-1194.
  16. Audretsch, D-B & Menkveld, A-J & Thurik, A-R, 1996. "The Decision Between Internal and External R&D," Papers 9603/e, NEUHUYS - RESEARCH INSTITUTE FOR SMALL AND MEDIUM.
  17. A. Spithoven & B. Clarysse & M. Knockaert, 2009. "Building Absorptive Capacity to Organise Inbound Open Innovation in Low Tech Industries," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/606, Ghent University, Faculty of Economics and Business Administration.
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