R&D Cooperation or Competition in the Presence of Cannibalization

29 Pages Posted: 7 Sep 2000

See all articles by Paul Belleflamme

Paul Belleflamme

CORE and Louvain School of Management, UCL (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: June 6, 2000

Abstract

R&D cooperation is reconsidered in situations where firms direct R&D activities towards a new product that cannibalizes the firms' existing products. For soft cannibalization, the welfare-maximizing arrangement between firms involves, for low R&D costs, the formation of a separate entity that independently chooses both the output level of the new good and the level of R&D expenditures and otherwise, joint decisions about R&D but independent decisions about production. Yet, as cannibalization increases, firms find it unprofitable to market the new good unless they collaborate more narrowly. Merger should then be permitted for the socially desirable introduction of the new good.

Keywords: R&D cooperation, joint ventures, cannibalization

JEL Classification: L13, O32

Suggested Citation

Belleflamme, Paul, R&D Cooperation or Competition in the Presence of Cannibalization (June 6, 2000). Available at SSRN: https://ssrn.com/abstract=235767 or http://dx.doi.org/10.2139/ssrn.235767

Paul Belleflamme (Contact Author)

CORE and Louvain School of Management, UCL (Université Catholique de Louvain) ( email )

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