Save the Companion: Why Technological Leaders Share the Research Output with Competitors
April 2, 2013 Leave a comment
Save the Companion: Why Technological Leaders Share the Research Output with Competitors
Yuri Jo KAIST Business School
Chang-Yang Lee Korea Advanced Institute of Science & Technology (KAIST)
March 1, 2013
KAIST Business School Working Paper Series No. 2013-005
Abstract:
This paper investigates the reasons why technological leaders voluntarily share their research outputs with competitors, especially those with lower research capability. Building a two-stage analytical model, we show that technological leaders have incentives to create cooperative knowledge partnership in order to induce competitors to commit more efforts to R&D. With weak knowledge spillovers, firms with low research capability are discouraged from doing R&D because they lack research capability to compete for innovation. Under some conditions, those discouraged competitors harm leading firms’ profitability because the leaders produce most knowledge for the industry. Hence, the leading firms have incentives to share their R&D outputs to encourage competitors to contribute more to the knowledge pool in the industry, which is beneficial to both of them. The leader’s incentive increases as unintended knowledge leakage is in low level, the leader’s research capability is moderate and capability gap between firms is small. Interestingly, a high level of capability gap also makes it possible for firms to form knowledge partnership if the lagging competitor is far inefficient. We found supportive empirical evidence for our model. Competing firms are more likely to cooperate in R&D as the level of unintended knowledge spillovers is lower and the asymmetry in their R&D productivities is larger. Our study sheds new light on firm cooperative behavior by providing theoretical foundation for knowledge partnering among asymmetric competitors.
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