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Cooperation or competition in R&D when innovation and absorption are costly

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  • Lars Wiethaus

Abstract

This article analyzes cost-reducing R&D investments by firms that behave non-cooperatively or cooperatively. Firms face a trade-off between allocating their R&D investments to innovate or to imitate (absorb). We find that the non-cooperative behavior not only induces more imitation (absorption) but also, for the most part, more innovation investments. Only the cooperative behavior, however, ensures that R&D investments are allocated efficiently to innovation and to imitation (absorption) in the sense that any given amount of industry-wide cost reduction is obtained for the minimum overall R&D costs.

Suggested Citation

  • Lars Wiethaus, 2006. "Cooperation or competition in R&D when innovation and absorption are costly," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(6), pages 569-589.
    • Handle: RePEc:taf:ecinnt:v:15:y:2006:i:6:p:569-589
    DOI: 10.1080/10438590500268272
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