Optimal Sharing Strategies in Dynamic Games of Research and Development

46 Pages Posted: 2 Jul 2007 Last revised: 22 Feb 2015

See all articles by Nisvan Erkal

Nisvan Erkal

University of Melbourne - Faculty of Business and Economics

Deborah Minehart

Government of the United States of America - Department of Justice

Date Written: June 2008

Abstract

This paper builds a theoretical foundation for the dynamics of knowledge sharing in private industry. In practice, research and development projects can take years or even decades to complete. We model an uncertain research process, where research projects consist of multiple sequential steps. We ask how the incentives to license intermediate steps to rivals change over time as the research project approaches maturity and the uncertainty that the firms face decreases. Such a dynamic approach allows us to analyze the interaction between how close the firms are to product market competition and how intense that competition is. If product market competition is relatively moderate, the lagging firm is expected never to drop out and the incentives to share intermediate research outcomes decreases monotonically with progress. However, if product market competition is relatively intense, the incentives to share may increase with progress. These results illustrate under what circumstances it is necessary to have policies aimed at encouraging cooperation in R&D and when such policies should be directed towards early vs. later stage research.

Keywords: multi-stage R&D, innovation, knowledge sharing, licensing, dynamic games

JEL Classification: L24, O30, D81

Suggested Citation

Erkal, Nisvan and Minehart, Deborah, Optimal Sharing Strategies in Dynamic Games of Research and Development (June 2008). Available at SSRN: https://ssrn.com/abstract=997336 or http://dx.doi.org/10.2139/ssrn.997336

Nisvan Erkal (Contact Author)

University of Melbourne - Faculty of Business and Economics ( email )

Victoria, 3010
Australia
+61 3 8344 3307 (Phone)
+61 3 8344 6899 (Fax)

HOME PAGE: http://www.nisvanerkal.net

Deborah Minehart

Government of the United States of America - Department of Justice ( email )

950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
United States

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