Save the Companion: Why Technological Leaders Share the Research Output with Competitors

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 

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.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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