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An Experimental Analysis of Dynamic Incentives to Share Knowledge

Cary A. Deck

University of Arkansas - Department of Economics

Nisvan Erkal

University of Melbourne - Department of Economics

August 31, 2009

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.

Number of Pages in PDF File: 38

Keywords: experiments, multi-stage R&D, stochastic R&D, cooperative R&D, knowledge sharing, research joint ventures

JEL Classification: C91, L24, O3, D81

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Date posted: October 27, 2009  

Suggested Citation

Deck, Cary A. and Erkal, Nisvan, An Experimental Analysis of Dynamic Incentives to Share Knowledge (August 31, 2009). Available at SSRN: http://ssrn.com/abstract=1494325 or http://dx.doi.org/10.2139/ssrn.1494325

Contact Information

Cary A. Deck
University of Arkansas - Department of Economics ( email )
Fayetteville, AR 72701
United States
479-575-6226 (Phone)
479-575-3241 (Fax)
Nisvan Erkal (Contact Author)
University of Melbourne - Department of Economics ( email )
Victoria, 3010
+61 3 8344 3307 (Phone)
+61 3 8344 6899 (Fax)
HOME PAGE: http://www.nisvanerkal.net
Feedback to SSRN

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