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R&D: Competition, Risk, and Performance

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  • Herman C. Quirmbach

Abstract

Anticipated postinnovation collusion encourages R&D effort, but realized collusion later yields deadweight losses. In balancing this tradeoff, Bertrand industries sometimes outperform Cournot; sometimes they do not. Both usually outperform perfectly collusive industries. The optimal level of collusion is often less collusive than Cournot duopoly. In Bertrand industries, too few firms do R&D. The same goes for long-shot or high-cost projects in all industries. However, in perfectly collusive industries, too many firms invest when a project has medium to high chances of success. Investment by Cournot industries is often close to optimal.

Suggested Citation

  • Herman C. Quirmbach, 1993. "R&D: Competition, Risk, and Performance," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 157-197, Summer.
    • Handle: RePEc:rje:randje:v:24:y:1993:i:summer:p:157-197
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    Cited by:

    1. Igor Letina, 2016. "The road not taken: competition and the R&D portfolio," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 433-460, May.
    2. Un, C. Annique & Cuervo-Cazurra, Alvaro, 2008. "Do subsidiaries of foreign MNEs invest more in R&D than domestic firms?," Research Policy, Elsevier, vol. 37(10), pages 1812-1828, December.
    3. Anthony Creane, 2007. "Note on uncertainty and socially excessive entry," International Journal of Economic Theory, The International Society for Economic Theory, vol. 3(4), pages 329-334, December.
    4. Bernard Beaudreau, 1996. "R&D: To Compete or to Cooperate?," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 4(3), pages 173-186.
    5. Chen, Feng & Wu, Bin & Lou, Wenqian, 2021. "An evolutionary analysis on the effect of government policies on green R & D of photovoltaic industry diffusion in complex network," Energy Policy, Elsevier, vol. 152(C).
    6. Kangoh Lee, 2020. "The value and direction of innovation," Journal of Economics, Springer, vol. 130(2), pages 133-156, July.
    7. Miguel González-Maestre & Lluís M. Granero, 2016. "Merger policy in innovative industries," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 15(3), pages 131-147, December.
    8. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2017. "Research and Development Cooperatives and Market Collusion: A Global Dynamic Approach," Journal of Optimization Theory and Applications, Springer, vol. 174(2), pages 567-612, August.
    9. Mingdi Xin & Vidyanand Choudhary, 2019. "IT Investment Under Competition: The Role of Implementation Failure," Management Science, INFORMS, vol. 65(4), pages 1909-1925, April.
    10. Cuervo-Cazurra, Alvaro & Un, C. Annique, 2007. "Regional economic integration and R&D investment," Research Policy, Elsevier, vol. 36(2), pages 227-246, March.
    11. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2016. "R&D Cooperatives and Market Collusion: A Global Dynamic Approach," Tinbergen Institute Discussion Papers 16-048/II, Tinbergen Institute.
    12. Goddard, Ellen W. & Shank, Benjamin & Panter, Chris & Nilsson, Tomas K.H. & Cash, Sean B., 2007. "Canadian Chicken Industry: Consumer Preferences, Industry Structure and Producer Benefits from Investment in Research and Advertising," Project Report Series 52088, University of Alberta, Department of Resource Economics and Environmental Sociology.
    13. Yenipazarli, Arda, 2019. "Incentives for environmental research and development: Consumer preferences, competitive pressure and emissions taxation," European Journal of Operational Research, Elsevier, vol. 276(2), pages 757-769.
    14. David Colander, 2000. "New Millennium Economics: How Did It Get This Way, and What Way Is It?," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 121-132, Winter.
    15. Fan, Ruguo & Bao, Xuguang & Du, Kang & Wang, Yuanyuan & Wang, Yitong, 2022. "The effect of government policies and consumer green preferences on the R&D diffusion of new energy vehicles: A perspective of complex network games," Energy, Elsevier, vol. 254(PA).

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