Monday, May 13, 2013
Posted by D. Daniel Sokol
David Besanko, Northwestern University - Kellogg School of Management and Jianjun Wu, Princeton Economics Group, Inc. discuss The Impact of Market Structure and Learning on the Tradeoff between R&D Competition and Cooperation.
ABSTRACT: This paper compares R&D competition and cooperation when firms can devote resources to a ‘safe’ investment or a risky R&D investment. When the discovery of a new product creates positive externalities on non‐discovering firms, equilibrium investment flow, ex ante investment, and welfare under R&D competition are less than or equal to what they are under research cooperation. With negative externalities, R&D cooperation results in the same or lower ex ante investment than under R&D competition, and social welfare may also be less. Our results have relevance for empirical studies of the impact of R&D cooperation on R&D outcomes.