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Research and Development Cooperation between Rivals: A Novel Motive beyond New Knowledge

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DOI: 10.4236/ti.2011.21006    4,444 Downloads   7,492 Views  
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ABSTRACT

The paper examines a motive for R&D cooperation with a rival by considering the behavior of a quality follower in a model of vertically differentiated products. We show that, in some settings, a quality follower has an incentive to contribute money to R&D activity of a quality leader with the sole purpose of making the leader’s products even better. The reason behind this motivation is that the leader’s product quality is serving as an upper-constraint in the decision process of the follower regarding product quality selection. Thus, if the leader’s product quality is raised both firms will be better off.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

L. Niem, "Research and Development Cooperation between Rivals: A Novel Motive beyond New Knowledge," Technology and Investment, Vol. 2 No. 1, 2011, pp. 47-51. doi: 10.4236/ti.2011.21006.

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