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Research and Development Cooperation between Rivals: A Novel Motive beyond New Knowledge
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Technology and Investment·Volume 02 (2011)·Pages 47–51·Published 25 February 2011·DOI10.4236/ti.2011.21006
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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.
KeywordsProduct QualityR&D CooperationKnowledgeMotive
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