Full Disclosure of Knowledge Between Rivals

We develop a symmetric duopoly model with strategic R&D spillovers where a specific type of innovation, recombinant innovation is introduced. Two major factors of effective knowledge spillovers, the technological learning parameters of the recombinant generation of new knowledge and the absorptive capacity of firms, are assumed to be exogenously determined. However, the third principal factor of the effectiveness of learning from rivals is endogenous: it is assumed that firms have control over the two individual spillover coefficients of the model. It is shown that identical firms operating in the same industry choose the highest level for the two spillover variables under plausible constellations of learning parameters. Furthermore, the realistic set of learning parameters is enlarged in the case where firms are able to commit to knowledge sharing strategies at the outset, thereby increasing the possibility of firms fully disclosing their knowledge in equilibrium.