Information Sharing and Cumulative Innovation in Business Networks

26 Pages Posted: 17 Dec 2003

See all articles by Gilles Saint-Paul

Gilles Saint-Paul

University of Toulouse I - GREMAQ-IDEI; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: November 2003

Abstract

How can we explain the success of cooperative networks of firms that share innovations, such as Silicon Valley or the Open Source community? This Paper shows that, if innovations are cumulative, making an invention publicly available to a network of firms may be valuable if the firm expects to benefit from future improvements made by other firms. A cooperative equilibrium where all innovations are made public is shown to exist under certain conditions. Furthermore, such equilibrium does not rest on punishment strategies being followed after a deviation: it is optimal not to deviate regardless of other firm's actions following a deviation. A cooperative equilibrium is more likely to arise, the greater the number of firms in the network. When R&D effort is endogenous, cooperative equilibria are associated with strategic complementarities between firms' research effort, which may lead to multiple equilibria.

Keywords: R&D, cooperation, innovation, growth, technical progress, information sharing, open source, Silicon Valley, cumulative knowledge

JEL Classification: O30

Suggested Citation

Saint-Paul, Gilles, Information Sharing and Cumulative Innovation in Business Networks (November 2003). CEPR Discussion Paper No. 4116. Available at SSRN: https://ssrn.com/abstract=480643

Gilles Saint-Paul (Contact Author)

University of Toulouse I - GREMAQ-IDEI ( email )

Manufacture des Tabacs
21 Allees de Brienne
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+33 5 6112 8544 (Phone)
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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