Hostname: page-component-669899f699-tpknm Total loading time: 0 Render date: 2025-04-25T19:54:44.827Z Has data issue: false hasContentIssue false
  • English
  • Français

Asymmetric firms, technology sharing and R&D investment

Published online by Cambridge University Press:  14 March 2025

Matthew R. Roelofs ,
Stein E. Østbye  and
Eirik E. Heen
Matthew R. Roelofs*
Affiliation:
College of Business and Economics, Western Washington University, Bellingham, WA, USA
Stein E. Østbye
Affiliation:
School of Business and Economics, UiT The Arctic University of Norway, Tromsø, Norway
Eirik E. Heen
Affiliation:
School of Business and Economics, UiT The Arctic University of Norway, Tromsø, Norway
*
matthew.roelofs@wwu.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

We use a combination of theory and experiment to study the incentives for firms to share knowledge when they engage in research and development (R&D) in an uncertain environment. We consider both symmetric and asymmetric starting points with regards to the amount of initial knowledge firms have before conducting R&D and look at how differences in starting positions affect the willingness of firms to share knowledge. We investigate when and if firms find R&D cooperation beneficial and how investment in R&D is affected by the outcome of the sharing decisions. The experimental evidence shows that overall subjects tend to behave consistently with theoretical predictions for the sharing of knowledge, although leaders who are not compensated by a side payment from laggards are more willing to share than predicted by the theory, and leaders who are compensated are less willing. The data on investment suggests less investment with sharing than without, consistent with theory. Compared to exact numerical predictions, there is overinvestment or underinvestment except for symmetric firms under no sharing. All cases of overinvestment and underinvestment, regardless of sharing or not and regardless of starting positions, are well explained by smoothed-out best (quantal) responses.

Keywords

Research and developmentCooperationInvestmentLeader and laggard

JEL classification

C92: Laboratory, Group Behavior D83: Search • Learning • Information and Knowledge • Communication • Belief • Unawareness L14: Transactional Relationships • Contracts and Reputation • Networks C72: Noncooperative Games O32: Management of Technological Innovation and R&D
Type
Original Paper
Information
Experimental Economics , Volume 20 , Issue 3 , September 2017 , pp. 574 - 600
Copyright
Copyright © 2016 Economic Science Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-016-9500-5) contains supplementary material, which is available to authorized users.

References

Amir, R (2000). Modelling imperfectly appropriable R&D via spillovers. International Journal of Industrial Organization, 18, 1013–1032. 10.1016/S0167-7187(00)00071-0CrossRefGoogle Scholar
Anbarci, N, & Feltovich, N (2013). How sensitive are bargaining outcomes to changes in disagreement payoffs?. Experimental Economics, 16, 560–596. 10.1007/s10683-013-9352-1CrossRefGoogle Scholar
Baumol, WJ (1992). Horizontal collusion and innovation. The Economic Journal, 102, 129–137. 10.2307/2234858CrossRefGoogle Scholar
Baumol, WJ (1993). Entrepreneurship, management and the structure of payoffs, Cambridge, MA: MIT Press.Google Scholar
Beath, J, Katsoulacos, Y, & Ulph, D (1989). The game-teheoretic analysis of innovation: A survey. Bulletin of Economic Research, 41, 163–184. 10.1111/j.1467-8586.1989.tb00335.xCrossRefGoogle Scholar
Bohnet, I, & Huck, S (2004). Repetition and reputation: Implications for trust and trustworthiness when institutions change. American Economic Review, 94, 362–366. 10.1257/0002828041301506CrossRefGoogle Scholar
Brandenburger, A, & Nalebuff, B (1995). The right game: Use game theory to shape strategy. Harvard Business Review, 73(4), 57–71.Google Scholar
Cameron, AC, & Trivedi, PK (2009). MIcroeconometrics using Stata, College Station: Stata Press.Google Scholar
Cantner, U, Guerzoni, M Audretsch, DB, Falck, O, Heblich, S, & Lederer, A (2011). Innovation and the evolution of industries: A tale of incentives, knowledge and needs. Handbook of research on innovation and entrepreneurship, Cheltenham: Edward Elgar.Google Scholar
Cason, TN, & Gangadharan, L (2013). Cooperation spillovers and price competition in experimental markets. Economic Inquiry, 51, 1715–1730. 10.1111/j.1465-7295.2012.00486.xCrossRefGoogle Scholar
Clark, DJ, Østbye, SE, & Roelofs, MR (2009). Should birds of a feather flock together? Theory and experiments on knowledge sharing in research and development, New York: Mimeo, University of Tromsø.Google Scholar
Cohen, WM, & Levinthal, WM (1989). Innovation and learning: The two faces of R&D. The Economic Journal, 99, 569–596. 10.2307/2233763CrossRefGoogle Scholar
Combs, KL (1993). The role of information sharing in cooperative research and development. International Journal of Industrial Organization, 11, 535–551. 10.1016/0167-7187(93)90024-7CrossRefGoogle Scholar
Darai, D, Sacco, D, & Schmutzler, A (2010). Competition and innovation: An experimental investigation. Experimental Economics, 13, 439–460. 10.1007/s10683-010-9250-8CrossRefGoogle Scholar
Dasgupta, P Stiglitz, JE, & Mathewson, GF (1986). The theory of technological competition. New developments in the analysis of market structure, London: MacMillan Press.Google Scholar
d’Asprémont, C, & Jacquemin, A (1988). Cooperative and noncooperative R&D in duopoly with spillovers. American Economic Review, 78, 1133–1137.Google Scholar
De Bondt, R (1997). Spillovers and innovative activities. International Journal of Industrial Organization, 15, 1–28. 10.1016/S0167-7187(96)01023-5CrossRefGoogle Scholar
De Bondt, R, & Henriques, I (1995). Strategic investment with asymmetric spillovers. Canadian Journal of Economics, 28, 656–674. 10.2307/136055CrossRefGoogle Scholar
Deck, C, & Erkal, N (2013). An experimental analysis of dynamic incentives to share knowledge. Economic Inquiry, 51, 1622–1639. 10.1111/j.1465-7295.2010.00333.xCrossRefGoogle Scholar
Dechenaux, E, Kovenock, D, & Sheremeta, RM (2015). A survey of experimental research on contests, all-pay auctions and tournaments. Experimental Economics, 18, 609–669. 10.1007/s10683-014-9421-0CrossRefGoogle Scholar
Fischbacher, U (2007). z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10, 171–178. 10.1007/s10683-006-9159-4CrossRefGoogle Scholar
Friedman, D, & Sunder, S (1994). Experimental economics: A primer for economists, Cambridge, MA: Cambridge University Press 10.1017/CBO9781139174176CrossRefGoogle Scholar
Goeree, JK, Holt, C, & Palfrey, TR (2005). Regular quantal response equilibrium. Experimental Economics, 8, 347–367. 10.1007/s10683-005-5374-7CrossRefGoogle Scholar
Gürerk, Ö, & Selten, R (2012). The effect of payoff tables on experimental oligopoly behavior. Experimental Economics, 15, 499–509. 10.1007/s10683-011-9310-8CrossRefGoogle Scholar
Halbheer, D, Fehr, E, Goette, L, & Schmutzler, A (2009). Self-reinforcing market dominance. Games and Economic Behavior, 67, 481–502. 10.1016/j.geb.2009.02.006CrossRefGoogle Scholar
Harrison, GW (2007). House money effects in public good experiments: Comment. Experimental Economics, 10, 429–437. 10.1007/s10683-006-9145-xCrossRefGoogle Scholar
Hauenschild, N (2003). On the role of input and output spillovers when R&D projects are risky. International Journal of Industrial Organization, 21, 1065–1089. 10.1016/S0167-7187(03)00019-5CrossRefGoogle Scholar
Henriques, I (1990). Cooperative and noncooperative R&D with spillovers: Comment. American Economic Review, 80, 638–640.Google Scholar
Kamien, M, Muller, E, & Zang, I (1992). Research joint ventures and R&D cartels. American Economic Review, 82, 1293–1306.Google Scholar
Katz, ML, & Ordover, JA (1990). R&D cooperation and competition. Brookings papers on economic activity. Microeconomics, Washington, DC: Brookings Institution.Google Scholar
Konrad, KA (2009). Strategy and dynamics in contests, New York: Oxford University Press.CrossRefGoogle Scholar
Kultti, K, & Takalo, T (1998). R&D spillovers and information exchange. Economics Letters, 61, 121–123. 10.1016/S0165-1765(98)00152-9CrossRefGoogle Scholar
McKelvey, RD, & Palfrey, TR (1995). Quantal response equilibria for normal form games. Games and Economic Behavior, 10, 6–38. 10.1006/game.1995.1023CrossRefGoogle Scholar
McKelvey, RD, & Palfrey, TR (1998). Quantal response equilibria for extensive form games. Experimental Economics, 1, 9–41. 10.1023/A:1009905800005CrossRefGoogle Scholar
McKelvey, RD, & Palfrey, TR (2015). Erratum to: Quantal response equilibria for extensive form games. Experimental Economics, 18, 762–763. 10.1007/s10683-015-9471-yCrossRefGoogle Scholar
Miyagiwa, K, & Ohno, Y (2002). Uncertainty, spillovers, and cooperative R&D. International Journal of Industrial Organization, 20, 855–876. 10.1016/S0167-7187(01)00079-0CrossRefGoogle Scholar
Østbye, SE, & Roelofs, MR (2013). The competition-innovation relationship: Is R&D cooperation the answer?. Economics of Innovation and New Technology, 22, 153–176. 10.1080/10438599.2012.724908CrossRefGoogle Scholar
Petit, ML, & Tolwinski, B (1999). R&D cooperation or competition?. European Economic Review, 43, 185–208. 10.1016/S0014-2921(97)00111-6CrossRefGoogle Scholar
Porter, M (1980). Competitive strategy: Techniques for analyzing industries and competitors, New York: The Free Press.Google Scholar
Potters, J, & Suetens, S (2009). Cooperation in experimental games of strategic complements and substitutes. The Review of Economic Studies, 76, 1125–1147. 10.1111/j.1467-937X.2009.00548.xCrossRefGoogle Scholar
Poyago-Theotoky, J (1996). R&D competition with asymmetric firms. Scottish Journal of Political Economy, 43, 334–342. 10.1111/j.1467-9485.1996.tb00849.xCrossRefGoogle Scholar
Sacco, D, & Scmutzler, A (2011). Is there a u-shaped relation between competition and investment?. International Journal of Industrial Organization, 29, 65–73. 10.1016/j.ijindorg.2009.09.003CrossRefGoogle Scholar
Seade, J (1980). On the effects of entry. Econometrica, 48, 479–489. 10.2307/1911111CrossRefGoogle Scholar
Sena, V (2004). The return of the prince of Denmark: A survey on recent developments in the economics of innovation. The Economic Journal, 114, 312–332. 10.1111/j.1468-0297.2004.00225.xCrossRefGoogle Scholar
Silipo, DB (2005). The evolution of cooperation in patent races: Theory and experimental evidence. Journal of Economics, 85, 1–38. 10.1007/s00712-005-0115-0CrossRefGoogle Scholar
Silipo, DB (2008). Incentives and forms of cooperation in research and development. Research in Economics, 62, 101–119. 10.1016/j.rie.2008.04.003CrossRefGoogle Scholar
Suetens, S (2005). Cooperative and noncooperative R&D in experimental duopoly markets. International Journal of Industrial Organization, 23, 63–82. 10.1016/j.ijindorg.2004.11.004CrossRefGoogle Scholar
Suetens, S (2008). Does R&D cooperation facilitate price collusion? An experiment. Journal of Economic Behavior and Organization, 66, 822–836. 10.1016/j.jebo.2007.01.002CrossRefGoogle Scholar
Veugelers, R (1998). Collaboration in R&D: An assessment of theoretical and empirical findings. De Economist, 146, 419–443. 10.1023/A:1003243727470CrossRefGoogle Scholar
Wiethaus, L (2005). Absorptive capacity and connectedness: Why competing firms also adopt identical R&D approaches. International Journal of Industrial Organization, 23, 467–481. 10.1016/j.ijindorg.2005.03.002CrossRefGoogle Scholar
Supplementary material: File

Roelofs et al. supplementary material

Experiment Instructions
Download Roelofs et al. supplementary material(File)
File 360.9 KB