TITLE:
Research and Development Cooperation between Rivals: A Novel Motive beyond New Knowledge
AUTHORS:
Le Duc Niem
KEYWORDS:
Product Quality, R&D Cooperation, Knowledge, Motive
JOURNAL NAME:
Technology and Investment,
Vol.2 No.1,
February
25,
2011
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.