Comments for R&D cooperation or competition?

Ncunganyi Bejo Delia
As stated in the article, competition is often seen as a way to foster innovation. But in the past few years, R&D collaboration has been increasing, especially in high tech and pharmaceutical industries (Hagedorn,2002). The incentive to collaborate are numerous for firms. Not only it helps firms to avoid involuntary spillovers and make economies of scale and scope but it is…
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As stated in the article, competition is often seen as a way to foster innovation. But in the past few years, R&D collaboration has been increasing, especially in high tech and pharmaceutical industries (Hagedorn,2002).

The incentive to collaborate are numerous for firms. Not only it helps firms to avoid involuntary spillovers and make economies of scale and scope but it is as well a way to share knowledge, share the risks between firms and shorten innovation cycles. Cooperation also facilitates dealing with regulations and industry standard.

R&D collaboration can take different forms.Firms can cooperate with competitors, suppliers, clients and universities. And each kind of collaboration has its own benefits. Per example, collaboration with clients helps to decrease the risks that may come with the introduction of a new product or innovating product on the market. Where as a partnership with a supplier is important for cost reduction.

In conclusion, I think that R&D cooperation has a lot of perks, but it is not necessarily the best choice. It depends on goals that the firm wants to achieve, on the market structure, on the incentive or subsidy put in place by the government.

sources :

Mowery, David C. “Collaborative R&D: How Effective Is It?” Issues in Science and Technology 15, no. 1 (Fall 1998).

https://core.ac.uk/download/pdf/6787243.pdf

http://www.diw.de/documents/dokumentenarchiv/17/42164/2004-327-V01.pdf

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Akshat Prakash Verma
The question that we are trying to analyze here, “is R&D cooperation better or does R&D competition have more advantages?”, is a rather difficult one to answer. It doesn’t have a clear-cut answer because, as with other economic analyses, context is very important and so are some of the factors that determine the decision to cooperate or compete. I will…
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The question that we are trying to analyze here, “is R&D cooperation better or does R&D competition have more advantages?”, is a rather difficult one to answer. It doesn’t have a clear-cut answer because, as with other economic analyses, context is very important and so are some of the factors that determine the decision to cooperate or compete. I will try to analyze through a couple of examples the question that we have.
Before starting with the analysis, it is important that we remember that the firm is an economic agent and it operates because it wants to be profitable and make money. So, as with other economic decisions, it comes down a simple cost-benefit calculation. If the benefits associated with sharing knowledge & developing technical know-how with others outweighs the cost, it is a clear decision to cooperate rather than compete. But if it is the other way around, it makes much more sense to compete rather than cooperate. Now, let’s look at some of these benefits and costs.
Some of the benefits, as already mentioned in the article, are sharing costs, managing risks, exploiting synergies such as complementary skills and knowledge. But there are a couple of others as well which can be important in this decision. One of those is overall social development. Here, I will use the example of countries sharing their technical knowledge and jointly developing technical prowess. Major countries of the world jointly conduct research projects, which in the long run, are beneficial to the people of both the countries like in areas of medical research, space programs etc. Another example that can be discussed of exploiting complementary technologies is a country providing space centre to launch a satellite of another country, which then shares its results & knowledge with the first country. These collaborations indeed help both the countries. Here, using complementarity of knowledge, both parties are getting benefitted.
Another prime example is that of Linux, an open source operating system, which has been developed by the collaboration of developers all over the world! Such a system would have taken many years and a hefty amount of money for any company to develop, and it might not have been so good. So, here again, through collaboration, something has been developed that benefits all.
But, if one firms feels that the costs outweigh the benefits, then it will much rather compete rather than cooperate. The major ones are transaction costs & opportunity costs. Since, it is a joint collaboration between two firms, there are transaction costs like the ease with which knowledge is shared or if one of the firms is not keeping its side of the deal and is trying to block the other firm. Also, if one firm is significantly bigger than the other, the smaller one might feel that the larger firm is bullying and not giving them freedom to act in their own way, thus creating dissent – another reason why most of the M&As fail. Next is the opportunity cost, which means what the firm is losing out on when it is not innovating solely. Generally, the big ideas are few and if the firm is capable of developing it, then it might not want to share the benefits with the others, something we see in industries that have players competing for the same customers.
So, from the above examples we establish that the decision between cooperate or compete is not easy to make, and depending on the situation, this decision will vary.
References:
1. http://ec.europa.eu/research/iscp/index.cfm?pg=russia
2. http://www.oecd.org/environment/Research_Cooperation.pdf
3. https://www.jstor.org/stable/2632722?seq=1#page_scan_tab_contents

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Cocquereaux Camille
As we know R&D is important within companies. It plays a central role in the innovative process and in the competitive advantage. R&D supports the development of knowledge and technology, which are two success keys of innovation. We already speak about the competition between firms in the last comments on the blog (the advantages of patent, the incentive of innovation, competitive…
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As we know R&D is important within companies. It plays a central role in the innovative process and in the competitive advantage. R&D supports the development of knowledge and technology, which are two success keys of innovation.

We already speak about the competition between firms in the last comments on the blog (the advantages of patent, the incentive of innovation, competitive advantage, patent race…). It is why I am going to focus on the advantage of cooperation between firms.

For a long time, firms managed the R&D internally, now the number of firms which cooperate with other firms increases. Their goal is to improve their innovation capacity.

There is many pros of the R&D cooperation: it reduces costs, efforts and risks. In addition, according to Tsang there are 4 incentives to cooperate : creation of rents, improving the usage of resources, diversify the resources, and the restriction of resources. Moreover firms look after cooperation with the aim of gaining knowledge or diversifying. Garcia Vega demonstrated that firms which cooperated improved their performance (filed more patents).

“La théorie des ressources” analysed the distribution of knowledge around the cooperation. These capacity requires 4 steps :
– acquisition, assimiliation,transformation and finally exploitation.

However other factors are important when we speak about cooperation. To success the organisation of the firms is also significant. The firms must have the same goal, it must be established clearly in the beginning. They have to communicate with each other and find a way to work efficiency together (The managers have to pay attention to cultural differences that may exist). Moreover the cooperation has more chance to be successful if the partners trust each other (the judicial means are not always sufficient).

Hagedoom and Schakenraad showed that cooperation between companies leads to a higher profit. Cooperation is used especially in the biotechnological sector. Why? Because this sector required tacit skills (needs direct contact with other people to learn it). Example: ARIIS.

Nevertheless to succeed the partners must have the motivation to learn new skills, the firm must choose seriously their partners (they must be complementary) and have good relations with them.
In conclusion, cooperation has a lot of advantages but firms have to pay attention before taking any decision (which partners do we chose? Can we trust them? How will we work together?….).

Sources :

Julia Taddei Stradi (2012). «Dynamiques comportementales, technologiques et institutionnelles des alliances en recherche et développement» . Editions Publibook, p 127-137.
http://www.lemonde.fr/emploi/article/2013/03/11/comment-reussir-un-partenariat-en-recherche-et-developpement_1845981_1698637.html, consulté le 18 octobre 2016.
http://www.leem.org/creation-d-ariis-alliance-pour-recherche-l-innovation-des-industries-de-sante, consulté le 18 octobre 2016.

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Hogge Pauline
«There may be other factors affecting the choice between cooperation and competition in R&D». After reading several articles on the subject, I think several factors can come into account in the choice between cooperation and competition in R&D. One factor that seems important in order to make a choice between those criteria is the industry. Indeed, the greater the R&D expenditures in…
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«There may be other factors affecting the choice between cooperation and competition in R&D».

After reading several articles on the subject, I think several factors can come into account in the choice between cooperation and competition in R&D.

One factor that seems important in order to make a choice between those criteria is the industry. Indeed, the greater the R&D expenditures in a specific sector, the more interesting it is for companies to work together to share costs but also knowledge, which is not accessible to all.

A good example of a successful cooperation is the partnership between Vygon and the Carnot Cancer Institute, in the field of oncology. Through the sharing of their knowledge, expertise and funds, they have developed a cure that they could not have created nor financed independently.

Generally speaking, the pharmaceutical sector is a good example of cooperation between firms. Indeed, “in 2008, 64 cooperation agreements on biotechnology were identified, against 48 in 2007. These agreements are a priority on R&D, or 83% of total 64 agreements. They are more, transatlantic, signed between the US and European biopharmaceutical laboratory biotechnology companies.”1 These agreements allow the sharing of significant costs, as well as the dissemination of their developments around the world, both in America and Europe.

Although cooperation has many advantages, competition between companies also has a few. According to the French Institute of Enterprise, “the competition would accelerate investment and would be an engine for innovation”2. We can illustrate this with the case of Free in the mobile telephony sector. “Competition promotes growth because it forces companies to cut costs and innovate in order to maintain margins and market share”2.

In conclusion, the sector in which we find ourselves helps us to choose between cooperation and competition, depending on the goal we want to achieve. Indeed, these two ways of working are very different. Cooperation can reduce costs, increase the diffusion area and induce the sharing of knowledge and other skills, while competition accelerates investment, innovation and business growth.

References :
1http://www.cairn.info/revue-innovations-2010-2-page-81.htm
2http://www.institut-entreprise.fr/reflexions/societal/blog/lexemple-de-free-quand-la-concurrence-stimule-linnovation
http://www.alternatives-economiques.fr/recherche—les-entreprises-cooperent_fr_art_191_21788.html
http://www.instituts-carnot.eu/fr/actualite/3-exemples-apport-industrie-de-partenariats-retd-avec-instituts-carnot

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Guillaume De Munter
This article focuses on the controversial issue of the innovation’s policy of a company. Nowadays, the fast-moving environment makes the competition between firms even tougher than before and as mentioned in the paper written by Christine Halmenschlager, the apparent technological leadership of a company doesn’t necessarily mean that its market dominant position is secured forever. It explains why the R&D…
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This article focuses on the controversial issue of the innovation’s policy of a company. Nowadays, the fast-moving environment makes the competition between firms even
tougher than before and as mentioned in the paper written by Christine Halmenschlager, the apparent technological leadership of a company doesn’t necessarily mean that its market dominant position is secured forever. It explains why the R&D process is continuous and an integrant part of the strategy. Unfortunately, there is no clear-cut solution to choose between R&D cooperation or competition because both situations present strengths and drawbacks. The blogpost insisted on the importance of spillover but many other factors deserve consideration. In this comment, I have the pleasure to introduce 2 other factors that seem important as well: the feasibility of such a cooperation process and the ability to share the post innovation profits.

From a practical point of view, let us deal with the feasibility of such a R&D cooperation process. Before promoting cooperation or competition, it seems essential for firms to know if implementing a cooperation process is possible and more profitable or not depending on many other factors than the willingness of both firms: can firms fairly divide the innovation process? Is it worth? Are the skills of each firm complementary with those of the other firm? Besides, the feasibility of the project can be impacted by elements that are not directly linked to R&D: the industry itself (we can observe in OCDE statistics that R&D expenditures can heavily vary on countries, sectors, fields of science, …), the culture of a company (e.g. some firms promote competition as a key-value) and even the size of the firms needs to be taken into consideration. A bigger firm is more likely to invest more than a smaller firm. Therefore, in the case of cooperation, how can we split the benefits if initial investments diverge?

Let us now move on to another determinant factor that also needs to be plugged in: the ability to share the post innovation profits. Indeed, as underlined in the article written by Andrei Hagiu and David B. Yoffie, we were forced to admit that it is not easy to evolve in the patent market. They pointed out the inefficiency of the patent market due to many reasons: the difficulty to value a patent in comparison with another good, the lack of comparable because we are dealing with unique goods, the lack of intermediaries, the costs of finding all current users and potential applications, the fact that patents are often regarded as lottery tickets given that there is still uncertainty around it, etc. Similarly, the question of the post innovation in the case of a R&D cooperation is more or less the same: how could firms share and value the benefits of an innovation? Who is fairly placed to implement this laborious and singular process? How correctly determine the applications of an innovation?

According to me, to deal with this aspect of the issue can turn out to be a key-element for external actors like governments (supposed to be neutrals) to stimulate the R&D cooperation given that they could consequently enjoy, at least in theory, an increase of the social welfare. By developing this new factor, I would also like to underline the fact that firms are not the only actors. Many other ones could maybe play a bigger role in this process so as to make the R&D cooperation more attractive for firms.

As a matter of conclusion, I would insist on the fact that the complexity of choosing between cooperation and competition when it comes to R&D is mainly due to the singularity of each situation. When the firm has to set up its strategy, it is really important to have a whole picture of the situation by taking into account each factor. Besides, an intelligent hierarchy of those factors is of prime importance as well.

– Sources –

Manant Matthieu, « Coopération en R&D et hétérogénéité des compétences. Un modèle théorique», Revue économique 5/2010 (Vol. 61) , p. 837-858
URL : http://www.cairn.info/revue-economique-2010-5-page-837.htm.
DOI : 10.3917/reco.615.0837.

Halmenschlager Christine, « Une entreprise peut-elle rattraper son retard technologique ? Quelques éléments de réponse en économie de l’innovation », Revue d’économie politique 1/2012 (Vol. 122) , p. 1-35
URL : http://www.cairn.info/revue-d-economie-politique-2012-1-page-1.htm.
DOI : 10.3917/redp.217.0001.

http://www.oecd.org/innovation/inno/researchanddevelopmentstatisticsrds.htm

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Anant Jindal
If companies go for joint R&D ventures then they let go of the monopolistic profits, as they will have to share the technology and hence there will be competition in the market. If companies do it individually, then there are a lot of drawbacks. For companies, the drawbacks are, increased cost & time. for society as a whole, the…
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If companies go for joint R&D ventures then they let go of the monopolistic profits, as they will have to share the technology and hence there will be competition in the market. If companies do it individually, then there are a lot of drawbacks. For companies, the drawbacks are, increased cost & time. for society as a whole, the costs are, duplication of efforts and when one company succeeds, the added cost of monopoly prices.

I am going to make the point, in support of cooperation, that, there can be ventures which would not be possible if multiple entities don’t come together unit, and in that scenario, cooperation and collaboration is the only way to go. there can be many reasons for it. for starters, a single entity might not be able to bear the whole cost of R&D. As R&D might not always be fruitful, in case of cooperation, in can be shared between many. other reason requiring cooperation is, often, skills and technology available with single company might not be sufficient & even if companies have deep pockets, it might be the case that they won’t be able to achieve the goal just because they simply don’t have enough capable human resources and as there might not be enough supply, they can’t hire those many people even with enough money.

Let’s take example of a result of R&D cooperation which is literally orbiting the earth non stop since more than 15 years, the international space station. It is achieved by collaboration of multiple countries (15) and it would have not been possible had a single country tried this feat. they had to collaborate and share technology as well as people for making this.

Another example is android Operating System (OS). Android phones currently occupy more than 80% of market share (IDC report), and has been there consistently for a few years. And as we know, google develops android and distributes the code for free (or with some non-monetory agreement). Android phones have this high market share due to it being available as open source. Hence, many companies adopt android & add some personalized features, including the companies which can’t develop operating system on their own. So core OS remains same, and they are able to make handsome profit with it. google exploits other revenue streams, and in the end, it’s a win-win situation for all the partners. Had it been the case that every company had to build their own OS, then there would have been a lot of extra cost and a scattered market and many players wouldn’t have entered the market. so even after cooperation, competition increased in the segment. The shared OS model is perato optimal for all the partners, i.e. google and other cellphone companies.

I’d like to conclude with the following. every company would like to maximize it’s profits, and although it seems like competition and achieving monopolistic profits are right way to do it. But at times, there are things a single entity can’t take on single handedly, hence, at times, it is far more profitable to cooperate then compete for everyone.

references
https://en.wikipedia.org/wiki/International_Space_Station
http://www.idc.com/prodserv/smartphone-os-market-share.jsp
https://en.wikipedia.org/wiki/Android_(operating_system)

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Nicolas Juckler
R&D cooperation or competition? Which is better? Firms invest in R&D because it gives the knowledge to produce new products or existing ones at a lower cost. They can use it directly or sell the knowledge for other firms. Some studies have found that the social benefit from R&D may be better than the profit for the innovator. In some industries…
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R&D cooperation or competition? Which is better?
Firms invest in R&D because it gives the knowledge to produce new products or existing ones at a lower cost. They can use it directly or sell the knowledge for other firms. Some studies have found that the social benefit from R&D may be better than the profit for the innovator. In some industries (chemistry), the social benefit from R&D can be twice greater than the innovator’s profit. In others (scientific instrument industry) the social benefit can reach ten times the private rate. So, it’s primary to promote these R&D research to increase the social welfare.

But some reasons discourage R&D investments for some firms :
1) Large spillovers: As explained in the article, if spillovers are large, the competitive advantage motivation to invest in R&D is low because other firms can use the R&D’s efforts of the firm without paying anything.
2) Government policies: The government policies in some countries (US) sometimes stilt the private returns to R&D investments. But, note well, some other countries (Japan) try to promote hardly technological leadership.
3) Production of new or cheaper products: The production of new or cheaper products for the firms depends on their access to complementary technologies. The firms need many technologies to produce products for a cheaper price. So all the R&D research needed can be very expensive for only a small return.
4) Sale of R&D results: In absence of perfect discrimination, the innovative firm can’t have all the surplus of his R&D results.
These four elements discourage R&D investment for R&D competition.

Is it better to promote R&D cooperation than?
R&D cooperation allows the firms to better manage R&D process by different aspects as seen in the article. But this also have a cost. Many European initiatives promote collaboration in view of its benefits. But the firms must create an expensive structure to support the transfer of knowledge-based assets. The structure needed to form a R&D alliance are expensive. These are the hidden cost of collaboration and are not negligible.

R&D competition or collaboration have pros and cons. It will depend on many factors as the market, the competition, the country,… to decide which is better for the firm or the social welfare.

Sources:
https://www.brookings.edu/wp-content/uploads/1990/01/1990_bpeamicro_katz.pdf
The hidden costs of R&D collaboration, JRC TECHNICAL REPORTS, 02/2014.

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Laura Maldague
Knowing the huge amount of money needed to develop an R&D department, some would say it is better for firms to cooperate. Sharing research and knowledge could allow firms to develop efficient innovations more easily and at a lower cost. However, competition could be a great incentive to allocate some resources to R&D and to make firms more capable to…
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Knowing the huge amount of money needed to develop an R&D department, some would say it is better for firms to cooperate. Sharing research and knowledge could allow firms to develop efficient innovations more easily and at a lower cost. However, competition could be a great incentive to allocate some resources to R&D and to make firms more capable to innovate.
There exist many different factors that firms must analyse to decide whether they want to cooperate or compete. The R&D spillover is one that is briefly explained in the article “R&D cooperation or competition?”.
According to me, the history of the firms’ market and its characteristics are factors that need to be taken into account. In markets where the level of risk is quite high, cooperation seems to be the best solution. Several firms can share the risk. Furthermore, in a market where many companies have already failed to innovate, it could be preferable to try something new by gathering the views of different firms. This could allow them to find what has been done wrong and what can be improved. In such context, cooperation seems to be the best choice.
The size of the firm on the market can be another factor. Bigger firms with significant market shares could prefer to develop innovation on their own with their existing resources. Doing it this way, they can keep the benefit of the innovation for themselves and preserve their market shares. On the contrary, smaller companies with smaller market shares will have less incentive to innovate on their own. They may prefer cooperation in order to share costs, risk and develop quicker.
Resources seem then to be another decisive factor. Most of the larger firms have more capacity to innovate, because they often have more equipment, human resources and knowledge. They can benefit from economies of scale and are less risk averse. This is one of the reasons why they could prefer R&D competition.

Source: https://www.ipdigit.eu/2010/09/what-is-the-link-between-competition-and-innovation/

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Blockerye Nicolas
Once a company decides to develop a new product or process, it is essential for it to choose the optimal amount of research, development and investment it deems adequate. Incentives to invest are numerous as is the desire to remain number one in its field. In some industries, cooperation in research and development is common as it allows enterprises in…
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Once a company decides to develop a new product or process, it is essential for it to choose the optimal amount of research, development and investment it deems adequate. Incentives to invest are numerous as is the desire to remain number one in its field. In some industries, cooperation in research and development is common as it allows enterprises in cooperation to achieve significant economies of scale as well as to share the risks and costs. This practice is particularly common in the automotive sector such as the partnership with Renault and Nissan in the development in their SUV to name a few.
This article highlights the fact that cooperation in research and development does not always lead to the optimal amount of research and development required. Indeed, another factor may influence companies’ will to cooperate or not and this can be decisive for the outcome of the partnership.
First and foremost it is essential to pay attention to spillovers. If the impact is significant, then the cooperative Research & Development leads to more research and development. On the contrary, if the benefits are low, competition in research and development is the most effective.
However, this is not the only factor that influences whether cooperation between the two firms may take place. This is a point on which I have decided to focus even though it has not yet been highly developed in scientific research and I believe that it offers quite an innovative approach concerning the determination of partners in international cooperation.
Currently, most research starts with an internal vision within the company and focuses on its internal resources as well as its skills. However this new approach focuses on the structural and environmental aspects that may impact the firms.
This new approach is present in a context where markets are increasingly globalized and/or the companies find themselves obligated to cooperate with firms located in another geographical area.
The study ” Coopérations internationales en R&D : les effets de la distance sur le choix du pays des partenaires ” highlights that administrative, geographical, economic and technology distances play an essential role in the choice of partners. On the contrary, the cultural distance seems to have a lesser impact concerning the choice of partners. It is important to keep in mind that the research focused solely within the field of biotechnology and one should further this research in other areas in order to have more “all-around” results.

Angué Katia, Mayrhofer Ulrike, « Coopérations internationales en R&D : les effets de la distance sur le choix du pays des partenaires », M@n@gement 1/2010 (Vol. 13) , p. 2-37

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Nicolas Pire
There is no really clear answer to this question, the answer actually depends on many factors and is certainly not the same for all firms, sectors and all activities combined. The answer also depends on the player through which one we want to answer the question: First, it depends on the activity of the company, its sector: Indeed, we can observe…
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There is no really clear answer to this question, the answer actually depends on many factors and is certainly not the same for all firms, sectors and all activities combined. The answer also depends on the player through which one we want to answer the question:

First, it depends on the activity of the company, its sector: Indeed, we can observe a fierce struggle to innovation in sectors such as IT, mobile telephony, etc. which benefit consumers in the measures which these firms competing are doing everything to attract end users with new features to an increasingly attractive price. On the other hand, the war itself to innovation in the pharmaceutical sector entails the cost of drug development such that it is sometimes difficult for consumers to assume their cost.

Then it also depends on patent law, in fact, a system “winner takes all” greatly promote competition between companies because all the investments made in R & D will not be profitable to the company if the company is the first to make the discovery. Thus, companies will have no incentive to share the advances of their research, even if a social or environmental perspective, it would be without doubt preferable to cooperate in order to quickly find viable solutions to some major problems company such as automobile pollution, treatment against cancer, etc.

It was found that EU law is more flexible and encourage more business to pursue a research strategy and cooperative development that US law.

So many variable involved: Do we need to answer this question by positioning itself as a consumer, as a company or as a state? The answer to the question of whether the cooperation is more profitable than the competition will be impacted, but it also depend on the medium within which the undertaking or undertakings concerned, its location, sector, etc.

Sources :
http://www.persee.fr/doc/estat_0336-1454_1993_num_266_1_5766
http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/using-rivalry-to-spur-innovation

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Zhenyu Lao
Sorry for the format problem, i am posting the comment again. According to Damiano and Avi, the nature of R&D activity leads to a market failure in the provision of innovations. The failure is attributed to several factors. First, there is uncertainty about the outcome of R&D activity. Firms that devote resources to research into a new product or technique do…
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Sorry for the format problem, i am posting the comment again.
According to Damiano and Avi, the nature of R&D activity leads to a market failure in the provision of innovations. The failure is attributed to several factors. First, there is uncertainty about the outcome of R&D activity. Firms that devote resources to research into a new product or technique do not know whether they will succeed, or how long the research will take. Second, due to spillover effects, successful firms may not be able to appropriate all of the rents from the outcome of R&D activity. There are various ways in which imitation of a novel idea can take place: property rights may be only broadly attributed; researchers may
move between firms transferring knowledge from successful to unsuccessful firms, and so on. Unsuccessful firms can therefore benefit from successful R&D without paying the full cost.
As mentioned in blog, one way to mitigate the detrimental effects of this market failure is to have firms cooperate in R&D activities. Several studies has shown that if the spillover parameter is high, cooperation in R&D is more likely to take place, and that the cooperative level of R&D expenditure is higher than the competitive level.
At the same time, besides the spillover factor, uncertainty also plays an important role in the tradeoff between competition and cooperation. Marjit (1991) and Combs (1992) examined the role of uncertainty on the incentive to cooperate, and showed that cooperation will take place only when the probability of success is relatively high.
In my own perspective, local market regulation could also influence the choise dramatically. In most of the emerging markets, the regulation of R&D is vague. Companies who are planning to cooperate have to give a second thought about whether the other party will breach the contract or will other parties get the techonology unilateral and refuse to share theirs and will the company be protected and compensated when such thing happens. All those concerns is going to decrease the possibility of cooperation and most companies will choose R&D competition even when they know cooperation is beneficial.

reference list:
Marjit, S., 1991, “Incentives for cooperative and non-cooperative R and D in duopoly”,
Economics Letters, 37, 187-91.
Damiano, B. and Avi, W. n.d. “COOPERATION AND COMPETITION
IN A DUOPOLY R&D MARKET”

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Clemens Schreiber
Cooperation is with no doubt an important factor for significant innovation, as it was stated in many comments of this article. The whole academic world is based on the idea to share information, to evaluate scientific discoveries and to use existing knowledge for future research. The internet for example was invented in Cern, one of Europe’s first joint ventures which…
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Cooperation is with no doubt an important factor for significant innovation, as it was stated in many comments of this article. The whole academic world is based on the idea to share information, to evaluate scientific discoveries and to use existing knowledge for future research. The internet for example was invented in Cern, one of Europe’s first joint ventures which has 22 member states today (1).
That this kind of cooperation can also be beneficial for companies is a fundamental assumption of the European Commission. However in the business world we face different rules than in the academic world, since companies are much more focused on maximizing their own monetary profits.

How important the competitive market can be for companies was shown by Bruce Kogut and Udo Zander (2000) (2). In their study they analyzed the development of a company that was split into two new companies due to the separation of East and West Germany after the Second World War. The analysis shows that the company in the western part which was confronted with competitive market rules, developed better than the company that was centrally controlled by the East German government. One main reason was that the East German company was forced by the government to conduct high level research in many different areas (due to scarce research sources in East Germany), while the company in the western part was able to specialize in a few particular area. It could be argued that this specialization was due to competitive market pressure.

I think that this example shows on one hand that the European government should definitely intervene in order to avoid market collusion and to protect the competitive market. On the other hand it shows that specialization (of companies in particular business areas) can be an indicator for a functioning competitive market. This could mean, that as long as the diversification (between the companies) in the market is obtained, collusion is more unlikely.

1 https://home.cern/about
2 Kogut B., Zander U. (2000). Did socialism fail to innovate? A natural experiment of the two Zeiss companies. American Sociological Review, Vol.65.

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Johnpaul Weppler
Whether to collaborate or compete on R&D is a very complex issue, where there are many variables that come into play from multiple stakeholders, such as governments who may seek to protect their domestic R&D capabilities, and the potential for them to launch anti-trust lawsuits. However, I propose that the suitability for collaborating on R&D can only be determined on…
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Whether to collaborate or compete on R&D is a very complex issue, where there are many variables that come into play from multiple stakeholders, such as governments who may seek to protect their domestic R&D capabilities, and the potential for them to launch anti-trust lawsuits. However, I propose that the suitability for collaborating on R&D can only be determined on a case to case basis, and can depend on the market share owned by the cooperating partners.

If you look at the automotive industry, you will find that there is a significant opportunity for firms to collaborate on R&D, especially with the industry undergoing a paradigm shift with the advent of self-driving technologies and alternative powertrains. Sergio Marchionne, CEO of Fiat Chrysler Automobiles, is actively shopping a merger with fellow American Automakers as he claims that independent, overlapping R&D wastes $2.5-$4.5bn per year. While the cost synergies are evident, Marchionne was publicly rebuffed by General Motors who would prefer to maintain the status quo of competition.

Mergers are not always the solution, as in some cases they could negatively impact competition, such as if the world’s two largest automakers Toyota and GM were to merge, however smaller players such FCA merging with other automakers of a similar size or larger, would be undoubtedly beneficial, and could even the balance of power in the industry thereby delivering increased competition and value for the consumer.

In my opinion if a merger cannot be achieved, automakers should at the very least seek our JV’s for the most capital intensive R&D costs such as platform development, especially since most competitive automakers offer the exact same segments and are basically independently developing the same chassis as their competitors.

Ultimately it really depends on the market conditions, industry, firms, product offering, governmental regulations, and consumer appetite for collaborative R&D to succeed, despite the general conclusion that there are significant cost savings in pursuing collaboration.

References:

https://www.bloomberg.com/gadfly/articles/2016-04-18/marchionne-s-merger-fixation-makes-fiat-look-weak

https://www.fcagroup.com/en-US/investor_relations/events_presentations/quarterly_results_presentations/SM_Fire_investor_presentation.pdf

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Giulia Sargenti
Personally, I think it is quite difficult to assess absolutely if R&D are better off if a competition scheme is prospected between the firms or if, on the contrary, cooperation is the way. We could think, for instance, of a diversification of sectors. There are some in which a cooperation setting of joint R&D may be more efficient. The…
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Personally, I think it is quite difficult to assess absolutely if R&D are better off if a competition scheme is prospected between the firms or if, on the contrary, cooperation is the way.
We could think, for instance, of a diversification of sectors. There are some in which a cooperation setting of joint R&D may be more efficient. The research on health diseases and medicines for example may benefit a lot from an union of efforts between pharmaceutical firms. They play a national (or international) role in contributing to the human kind health research. This is a strong incentive and in the majority of the cases it is also a priority of states’ budget to invest in that sector.
Nevertheless, this should be the case of a non-cooperative setting within these companies otherwise collusive agreements may be the result as well. They may fund more profitable to agree on less research, for instance, so to cut their costs and increase their profits. As the European Commission has divulgated with its legislation, it is fundamental that this kind of cooperative agreements must be limited to the R&D area as objective and must respect a ceiling on the concentration of market power within the sector concerned.
Instead, as a conclusion, if we think about telecommunication technologies and the devices which are concerned with that I think that competition R&D structure may be more productive. Capturing new market shares of consumers will be the incentive for those companies to invest and have success the sooner as they can in new technologies and new products. Competition between firms in this case may be essential in enhancing innovation research.

Sources:
https://www.ipdigit.eu/2013/11/is-rd-cooperation-a-steppingstone-to-collusion/

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Tomasz Chwaja
R&D cooperation between the companies seems to be undoubtfully beneficial for both firms and their customers. Nowadays, CEOs and managers are not really willing to take the risk because it can result in a spectacular failure, especially in the times of financial crisis, possible Brexit and uncertainity caused by the situation in Middle East. Therefore, R&D cooperation can be a…
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R&D cooperation between the companies seems to be undoubtfully beneficial for both firms and their customers. Nowadays, CEOs and managers are not really willing to take the risk because it can result in a spectacular failure, especially in the times of financial crisis, possible Brexit and uncertainity caused by the situation in Middle East. Therefore, R&D cooperation can be a great way to minimize the risk of failure and avoid repeating the same job as the others. Moreover, the flow of information between the companies concerning technological improvements within the industry can be also beneficial for the customers since it can result in lower cost of products and services.

On the other hand, R&D cooperation can lead into collusive behaviour of the players on the market. Therefore it is right that European Commission took into took into consideration the maximum combined market share of the cooperating companies while revising its rules for the assessment of cooperation agreements. Thanks to that it is almost impossible for firms to collude on the prices because they can be easily beaten by their rivals who decide to lower the price of their products.

But is the R&D cooperation the one and only way to improve? Personally, I think it is really beneficial but the R&D competition concept is much more interesting for me. Especially, when we compare the competition between firms to the rivalry of artists during Renaissance. What is really important about the competition in that times is that it was more about being the best you can than about beating your rival. Artists borrowed from one another trying to master their field of interests.

In my opinion, the crucial concept of Renaissance rivalry was so called “paragone”. Artists’ works were supposed to be placed next to each other so everyone can judge them, criticise or praise. What is really important, it was all about choosing the best work of art, not only criticising and pointing mistakes. I believe it can be easily applied into today’s competition between companies. Their objective should be clear: be the best among all other firms. But it does not exclude some kind of cooperation between them, using the best practices of other company or even their know-how. What is more, this concept can be applied within the firm, as, what we can read in McKinsey article, it was applied in General Electrics. The teams can have different approach to the problem, can look into the issue from completly different points of view but thanks to the wise competition they can come up with the revolutionary ideas which can provide the company with the new competitive advantage.

To sum up, I think that both competition and cooperation on R&D can be beneficial for the companies. I am really convinced that the most beneficial relation between them is described by the concept of “paragone” from the Reinassance period.

Sources:
http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/using-rivalry-to-spur-innovation
http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=URISERV:l26069
https://www.ipdigit.eu/2013/11/is-rd-cooperation-a-steppingstone-to-collusion/

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Emeline Picard
In this comment I would like to discuss some other factors affecting the choice between cooperation and competition in R&D than those developed in the article. To give a theory-based answer, I focused on one really interesting article [1] that made me reflected about the topic. The references of the authors quoted bellow also come from this one article. We…
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In this comment I would like to discuss some other factors affecting the choice between cooperation and competition in R&D than those developed in the article. To give a theory-based answer, I focused on one really interesting article [1] that made me reflected about the topic. The references of the authors quoted bellow also come from this one article.
We will first see why choosing cooperation and then, why competition.

Which other factors can lead to choosing cooperation?

Firstly, the size of the firm can be a factor affecting the choice. According to the studies of Wu and Wei (1998) [2] about the market value of some firms and the relation with cooperation in R&D, there is a better incentive to cooperate for small firms. They tested how the market responded to the announcement of R&D cooperation between firms and they ended up to this conclusion: the more little the firm, the more the market value evolved positively.

Secondly, the costs and effort it involves are part of the answer. Choosing cooperation allow firms to not only share R&D costs but also internalize knowledge. As a result, this can lead to reduce involuntary spillovers or leaks and thus make the copy of the innovation by competitors less easy. Indeed, according to Lhuillery and Pfister (2009) [3], the result of most of the studies conducted about this subject is the fact that cooperation improve the innovative performance of the firms involved.

Thirdly, the choice may be influence by the position on the market and the delay firms may have. Cooperation is a way for new entrants or smaller firm to catch up their delay in R&D. Let us look at the triopole de Cournot, represented by, on one hand, two similar firms investing in R&D and with high production costs and on the other hand, a leader with low production cost and no R&D investments. In this case it is a good opportunity for the little firms to stick together and cooperate to catch up the delay they are facing. Comes next the questions of which kind of strategic alliance would suit the best.

We have seen possible reason to cooperate. Knowing this, why certain firms would rather choose competition?

Firstly, I will begin with a really intuitive case. When a big firm wants to stay leader on its market, it would rather choose competition to hinder potential entrants or smaller firms to benefit from its R&D discovery. However, we can argue that this delay of knowledge can be catch up due to externalities or spillovers. Likewise, a small firm that wants to take the leader’s place should come with a brand new idea in order to kick the current leader out of the market. In both cases, they should not share R&D and keep competing.

Secondly, firms can also choose competition because they don’t have the same incentives and goals as the other firms they could cooperate with. With the theory of Arrow about replacement effect, we know that challengers will have incentives to innovate more strenuously in order to kick the incumbent out of the market. On the contrary, the incumbent will remain to invest in R&D but concerning smaller innovations.

For instance, Microsoft has a position of leader concerning Windows and Office. The major innovation brought with the new versions consists in relooking the interface. But when the market becomes more competitive Microsoft becomes more innovative – such as with the Xbox – because Microsoft doesn’t have the place of leader anymore.

The point here is that Microsoft have little incentive to cooperate in R&D when it is a leader because the position is already satisfying and the spillovers are small. But it has also little incentives when it is a challenger because the purpose is to differentiate itself from the other competitors. The effort in R&D are adjusted regarding the position of the firm on the market, and as we can see, big firms often have incentive to compete rather than to cooperate.

In conclusion, it seems that with the arguments I brought, cooperation is a better option for little firms while competition is better for bigger firms. Nevertheless, I would like to add that we can still find other factors influencing cooperation or competition in R&D and maybe arrive to another conclusion. Also, let’s keep in mind that even if we can find a lot of theoretical paper about strategic interactions in R&D, only a few empirical studies have been conducted to confirm the results obtained. Remaining critical about concrete incentives and factors affecting the choice between cooperation and competition in R&D is then key point.

[1] HALMENSCHLAGER, Christine. Une entreprise peut-elle rattraper son retard technologique ? Quelques éléments de réponse en économie de l’innovation.Revue d’économie politique, 2012, vol. 122, no 1, p. 1-35.
DOI: 10.3917/redp.217.0001

[2] WU C. et WEI K. C. J. [1998], Cooperative R&D and the Value of the Firm, Review of Industrial Organization, 13, 4, 425-446. Quoted in [1].

[3] LHUILLERY S. et PFISTER E. [2009], R&D cooperation and failures in innovation projects: Empirical evidence from French CIS data, Research Policy, 38, 45-57. Quoted in [1].

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Giada Garofalo
It is evident that a fast-moving economy also implies a fierce competition between firms. Innovation is, without any doubt, the key to survive. In today’s economy, taking a clear position on the « cooperation or competition » dilemma when we talk about R&D is quite difficult, as both of them have pros and cons that will heavily affect the innovation…
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It is evident that a fast-moving economy also implies a fierce competition between firms. Innovation is, without any doubt, the key to survive.
In today’s economy, taking a clear position on the « cooperation or competition » dilemma when we talk about R&D is quite difficult, as both of them have pros and cons that will heavily affect the innovation process that a firm will undertake.

It is undeniable that combining resources will obviously generate many benefits to the firms involved. Cooperation, in fact, not only allows sharing investment costs reducing the waste of resources, but it also optimize the innovation process, enabling to obtain the solution much faster. Shared risks are also an incentive to cooperate. Furthermore, this strategy will allow a know-how sharing, creating synergies between the involved firms. Considering the context, it is also important take into account that, in an economy where some big firms are giants too difficult to outdo, cooperation between firms increases the probability to succeed. In fact, as reported by KellogInsight, “A study published in the Rand Journal of Economics investigated the chosen commercialization strategies of 118 entrepreneurs in five economic sectors. Researchers Scott Stern, Joshua Gans, and David Hsu revealed that the return on investment tended to be higher for a cooperation strategy than a competition strategy when one or more of three conditions existed for the start-up company. These conditions are the following:
1) The firm has a high degree of control over its intellectual property rights
2) The firm enjoys low deal transaction costs
3) There is a high sunk cost requirement for the firm to compete in its industry
By evaluating whether any of these three conditions exist, start-up executives can greatly increase their likelihood of successful product commercialization and boost their return on investment.” Anyway, against expectations, the results of a research reported in The Innovation Policy Platform show that “during 2006-2008, in the great majority of countries, large firms were significantly more likely to collaborate on innovation than small and medium-sized enterprises (SMEs). Among innovative SMEs, the rate of collaboration is between 25% and 40% in half of the countries surveyed, but it varies widely for large firms. More than 70% of large innovative firms collaborated on innovation in Denmark, Slovenia, Finland, Belgium, the United Kingdom and Austria, while less than one-third did so in China, Brazil and Mexico.” These results are an unconfutable proof that cooperation is sometimes extremely important to overcome heavy lacks in the technological and financial resources.
Nevertheless, although cooperation may bring a wide rage to advantages, it may also present many difficulties, as for example the disclosure of sensitive information.

While cooperation is maybe the best strategy for businesses themselves, competition may bring a larger advantage to the economy as a whole and the final consumer may have a larger choice of products and services. In fact, competition could drive innovation much more than cooperation. Moreover, in a competition situation, firms are more independent and have more ample space for manoeuvre. Of course, R&D’s high costs may discourage many firms to undertake innovation processes, and this is the negative effect of pure competition.

In conclusion, from my point of view, there is not a right answer to the question “Cooperation or Competition”, but there are different situations where one of the two is more indicated. The perfect solution probably relies in a mix of these two strategies, finding a way to maximize the positive aspects of each and reducing the negative impacts on the firms.

http://insight.kellogg.northwestern.edu/article/compete_or_cooperate
https://www.innovationpolicyplatform.org/content/technological-co-operation-between-firms

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Margot Detollenaere
In today's rapidly changing business environment, firms need to be innovative to remain competitive in the market. Creativity and innovation have become keys to the success of any business : creativity is part of the innovation process concentrated on developing original and useful ideas, while innovation refers to the implementation of the new way of doing things. In general,…
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In today’s rapidly changing business environment, firms need to be innovative to remain competitive in the market. Creativity and innovation have become keys to the success of any business : creativity is part of the innovation process concentrated on developing original and useful ideas, while innovation refers to the implementation of the new way of doing things.

In general, firms decide to invest in research and development (R&D) because it can generate the knowledge to create new and innovative products, to achieve economies of scale, or to add features to old products. There exists a tension between the need for R&D cooperation and the uncertainty of R&D competition, and managers’ choice depends on several factors. The principal aim of this comment is to identify why firms choose to cooperate in R&D.

As mentioned in the present article, the motivations for R&D cooperation are diverse. Firms might decide to cooperate because they need expertise that cannot be generated in-house. Along with this, organizations sometimes need resources that are difficult to mobilize and develop individually, and then, such collaborations can be seen as a sure path to the success of R&D projects.

In this context, the transfer of explicit and tacit knowledge might be enhanced by R&D cooperation. Explicit knowledge refers to content that can be transmittable in tangible form such as words. On the other hand, tacit knowledge is difficult to communicate because it has a personal dimension. The more tacit knowledge is, the more valuable it tends to be.

Finally, the determinants of R&D cooperation can differ according to the sector to which companies belong. Badillo and Moreno affirmed in their paper : “in the industrial sector, the perception of risk as an obstacle to innovation reduces the likelihood of cooperating with companies in the same group and competitors, while in the service sector it reduces cooperation with suppliers or customers.”

SOURCES :

Badillo, E., & Moreno, R. (2012). What Drives the Choice of Partners in R&D Cooperation? Heterogeneity across Sectors. Online
http://www.ub.edu/irea/working_papers/2012/201213.pdf, consulted on 17/10/16.

Becker, W., & Dietz, J. n.d. R&D Cooperation and Innovation Activities of Firms. Online https://core.ac.uk/download/pdf/6928659.pdf, consulted on 17/10/16.

Brooks, C. (2013). Innovation : Key to Successful Business. Online http://www.businessnewsdaily.com/5167-innovation.html, consulted on 17/10/16.

Cassiman, B., & Veugelers, R. (2001). R&D cooperation and spillovers : some empirical evidence from Belgium. Online http://web.iese.edu/bcassiman/aerversion-final.pdf, consulted on 17/10/16.

Dalkir, K. (2011). Introduction to Knowledge Management. In Knowledge Management in theory and in practice (pp. 1-30). Cambridge: MIT Press.

Sokolova, S. (2015). The Importance of Creativity and Innovation in Business. Online https://www.linkedin.com/pulse/importance-creativity-innovation-business-siyana-sokolova, consulted on 17/10/16.

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Maxime Servais  
Why do some firms in some industries decide to engage in R&D cooperation while others decide to compete against one another? At first glance, R&D cooperation seems to be the right way as it usually helps decreasing the risks (by joining forces with your competitors, you lower your own risk), it eliminates duplication of efforts (that one can usually find…
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Why do some firms in some industries decide to engage in R&D cooperation while others decide to compete against one another? At first glance, R&D cooperation seems to be the right way as it usually helps decreasing the risks (by joining forces with your competitors, you lower your own risk), it eliminates duplication of efforts (that one can usually find in patent races) and it allows for economies of scale (and scope in some situations). Still, we see many firms competing and one can wonder why it is the case. To further discuss the factors that affect the choice between cooperation and competition in R&D, I will use the example of Unilever. I am merely trying to show with this example that sometimes firms do not have any incentives to join their efforts and innovate as it may be strategically beneficial for them to undermine their rival’s innovation.

Unilever is a famous multinational consumer goods company that sells products such as food, beverages, cleaning agents, personal care products, etc. Not so long ago, the company introduced their compressed deodorants (a deodorant that last as long as the “normal one” but with less packaging). They basically compressed their regular cans into smaller ones but the smaller cans last as long as the regular cans. From a technological point of view, this is an impressive achievement. They invested a lot of money and time on R&D these last few years and were the only one of the industry to do so.
When first put on the market, these compressed cans confused a lot of consumers. The competition soon realized they could even further confuse the consumers by creating their own “smaller cans” (which were not compressed ones, they basically just made smaller cans) (see: http://www.cosmeticsdesign-europe.com/Packaging-Design/Beiersdorf-amends-pocket-deodorant-packs-following-Unilever-s-confusion-challenge). Unilever, in a desperate attempt to increase its sale of compressed deodorants, shared in 2015 its findings with the competition so that the whole industry would start producing compressed cans (see: https://www.unilever.com/sustainable-living/sustainable-living-news/news/Unilever-invites-competitors-to-share-emissions-saving-compressed-deos-technology.html).

So far, what has been the result? Well, no one could really say it has been the great success Unilever was probably expecting when it first introduced this new technology. I have chosen this example for a few reasons :

First of all, we see that in this particular industry, it would probably have been much better for Unilever to convince its major competitors to join efforts and invest in R&D together to create the compressed cans. Today, it would have become the “norm” as all major players would be selling and promoting it on the market. Instead, Unilever’s management decided to invest in R&D and to keep it secret. When they put their compressed cans on the market, they were the only one and had to educate the consumers about the benefits of these cans. The competition reacted in a fierce way : they made lots of advertisements to confuse consumers so that Unilever’ share of revenues from the compressed cans would be low. We clearly see here that other important factors (such as the market understanding of the product, the promotion, etc) had a deep impact on this innovation.
Secondly, Unilever shared its findings with the competition (which is equivalent to having large spillovers) but it had no effect as the competition thought it would be more appropriate to fight the innovation. Again, this example clearly illustrates the fact that other factors are at play when choosing between cooperation and competition in R&D.

In conclusion, others factors are at play when choosing between cooperation and competition in R&D; one of which is the market understanding of the product (one firm has a hard time educating the consumers as many firms joining efforts have higher chances).

http://www.cosmeticsdesign-europe.com/Packaging-Design/Beiersdorf-amends-pocket-deodorant-packs-following-Unilever-s-confusion-challenge
http://www.compresseddeodorants.fr/

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Elida Axundzada
We know that the R&D cooperation and R&D competition each have their strengths and their weaknesses. In my comment, I want to focus on the R&D cooperation and particularly, their effect on the innovation process. My analysis is based on the impact of this one on firm’s innovation. The innovation is not concentrated on the activity of a single firm but…
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We know that the R&D cooperation and R&D competition each have their strengths and their weaknesses. In my comment, I want to focus on the R&D cooperation and particularly, their effect on the innovation process. My analysis is based on the impact of this one on firm’s innovation.

The innovation is not concentrated on the activity of a single firm but rather it develops across the multiple actors of several firms. Therefore, the share of information’s and resources begins more and more important in the innovation process. “Such co-operations are defined as collaborations to achieve a common goal that is to develop new and improved products (technologies)”.
The positive effect of the R&D cooperation is the utilization of external resources (technological opportunities). Due to these technological opportunities, innovations are “cheaper” to realize. However, “R&D co-operations are an efficient strategy for adapting external resources only if the cost-benefit-relationship (‘trade-off’) of joint R&D is positive or at least can be expected to be positive.”
The disadvantage of this one is the transaction costs (for example: coordination of distinct organizational routines, combination of complementary assets, …). Moreover, the R&D cooperation is also faced to the unexpected risks such as an insufficient quality of assets, delays in development time, etc.

To illustrate the advantage of R&D cooperation, I take the case of Spanish firms. It’s interesting to analyse this country because it has fewer R&D activities than other European countries. Besides, the innovative firms have a low capacity and have a fewer stability with external partners. In addition to that, the barriers between firms and scientific bodies are very high.
While over the past two decades, by facilitating the R&D cooperation with scientific partners, we remark an important change in Spanish universities and in relationships between universities and firms. Hence, the R&D cooperation is a good for them promoting the collaboration with innovative firms, and in this case, it allows also to reduce the distance that has separated firms and universities that existed in the past.

In conclusion, in my opinion, the firms cooperating with universities invest more in the development and improvement (like the case of Spain, Germany, etc.) than others. Nevertheless, I am confident that it’s critical to also take into account the other factors like the size of firms, the risks, the context and many more, before to take a position and say R&D cooperation is very good tool. As we know, the effects of cooperation not concern only the firms themselves but also the whole society.

Sources

https://core.ac.uk/download/pdf/6928659.pdf

http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-27242013000100006

http://www.urv.cat/media/upload/arxius/catedra-innovacio-empresarial/Tertiary%20Education.pdf

http://www.sciencedirect.com/science/article/pii/S0167718706001391

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Minet Paul-Henri
As mentioned in the article, there is no clear cut answer to the question of which type of R&D investment is better (cooperation or competition). Cooperation is praised for different reasons: Less useless duplication of efforts, share of the costs, share of the know-how,…Moreover, R&D cooperation leads to more R&D (and so probably more efficient products) than competition in markets with…
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As mentioned in the article, there is no clear cut answer to the question of which type of R&D investment is better (cooperation or competition).

Cooperation is praised for different reasons: Less useless duplication of efforts, share of the costs, share of the know-how,…Moreover, R&D cooperation leads to more R&D (and so probably more efficient products) than competition in markets with large spillovers. Indeed, in a market where the spillovers are large, firms react strategically by investing less and free-riding because there is not a strong incentive to invest. There is no patent races in this case, so R&D cooperation could be a good thing in a social welfare point of view. In fact, that’s the direction the European commission took with the “block exemption of R&D agreements” that allows the cooperation between firms in order to promote innovation. In 2010, the commission has extended the scope of this regulation allowing “paid for research” agreements and more generally on enlarging the scope of the regulation.
On the other hand we could fear that the cooperation in the R&D stage leads after that in a cooperation/collusion in the product market stage through a cartel. It will of course reduce the social welfare and counterbalanced the benefits of the first stage cooperation.
Concretely, what we must keep in mind is that the choice between R&D cooperation/competition is influenced by the size of the spillovers in the market and by the legislation of competition authorities.

Competition is of course also praised : It’s a basic intuition that more competition between firms leads to a constant maximization of the company’s capacities to stay in the market and compete with each other. In the paper “using rivalry to spur innovation”, Jessica Goehtals even make a parallel with the “Renaissance” when the creativity was at its peak due to rivalries like “the ones between Leonardo, Michelangelo, Raphael, and Titian – that are commonly viewed as some of the most productive in history”. What really led productivity was the notion of paragone (comparison) between two artists which is a source of motivation. She makes a link with actual managerial methods proposing to do the same with R&D. For example 2 teams could work on the same project in separate ways to boost each other. When they find a solution, we make a comparison to see which the best is or we can mix the solutions. But it’s important that the competition stay healthy through “a culture of co-operation and collective achievements”.
This is an interesting proposition but we could face a problem: if many departments in R&D work on the same project, it can leads to a waste of time and resources and it would have been more optimized to affect different projects to the teams.

We can also point out some factors that can influence the choice between R&D competition and R&D cooperation. It could be a question of values: For example I personally think that the health sector shouldn’t be in a competitive environment. I’m convinced that this sector should be a form of worldwide R&D cooperation. One could say that this is a utopic vision : If we look at the pharmaceutical area, maybe that with no competition between firms innovation would be less encouraged. This affirmation could be true but here I just want to explain the fact that values could take precedence to pure economical aspects.
On parallel with the notion of values and concentrating more on managerial aspect, choices of firm’s managers could affect R&D’s decisions. Maybe firm’s managers could decide to participate in a corporate social responsible project with other firms and invest in R&D together without having the return on investment in mind.

Sources : http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=URISERV%3Acc0012
http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/using-rivalry-to-spur-innovation
http://www.leadershipreview.net/innovation-rivalry

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Axelle Charlier
I think we can clearly argue that R&D coopération has its strengths and weaknesses but in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research. R & D is closely linked to monopoly situations because incentives are given through the protection of intellectual property. This allows firms to use their knowledge and prevents competing…
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I think we can clearly argue that R&D coopération has its strengths and weaknesses but in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research.

R & D is closely linked to monopoly situations because incentives are given through the protection of intellectual property. This allows firms to use their knowledge and prevents competing firms to benefit from their discoveries without their explicit consent. However, if the research is encouraged through the protection of knowledge and the promotion of monopolistic situations resulting, it only improves the well-being if its fruits are distributed and used at a suitable scale. Of course control must be made to regulate either cooperation or competition that’s why different systems exist.
For example we have ex ante policies that intervene before the implementation of research efforts and provide the conditions for implementation of this activity and the distribution of its fruits (cooperation agreement and direct help from the state).

R & D is an activity increasingly costly due to high technology projects more often than in the past. Also private incentives to innovate are all lower than uncertainty is high and the costs are high. This leads firms to integrate vertically and/or horizontally and cooperate to limit the risk of failure and will gather more easily the funds necessary for research. Also sometimes an innovation engages the entire industry in a particular technological trajectory ( HDTV in Europe and MUSE in Japan, ETSI – European Telecommunication Standards Institute).

The cooperation enables the sharing of risks inherent in innovation. The companies pool their assets, their efforts and expertise. Businesses benefit from synergies due to the complementary knowledge and economies of scale. Also, they share the fruit of joint research. This type of agreement has the property to avoid duplication of efforts and use without charge by competing firms (spillovers). In addition it must generate a situation “more competitive” when innovation is achieved.

Hagedoorn and Schakenraad (1990) identified five distinct organizational forms: the creation of a joint subsidiary assigned to R & D ( “joint venture”); the Convention agreed to conduct a joint research project with specific cost-sharing and expertise; the contractual agreement technological exchanges in which the parties undertake to exchange information; taking financial interest in a company with a strong potential for technological innovation; Finally, the partnership agreements between the supplier of intermediate goods using new technology and the producer of a final good. The agreements are either horizontal (member companies are competitors) or vertical (the companies are at different stages of the production chain).

The state may intervene as part of cooperation agreements designating itself the companies involved in the research project and paying the team. Governments of industrialized countries spend a large share of their budget to R & D. The share of expenditure financed by the state is 50% in France and the United States, 33% in Germany and 20% in Japan. In France and in the framework of the European Community, support for research is developed in a number of leading sectors and concerns mostly large cooperative projects. For exemple, the French government is implementing sectoral and targeted research programs to fund public schools. In addition it develops programs by major sectors and offers non-targeted policies by developing tax deductions systems. The European Community promotes support systems for R & D on specific projects and focuses on large pre-competitive research projects organized under the “Framework Programs ».

In conclusion, I will say that cooperation will be highly needed in the futur if we want to grow our market and society welfare but regulation on cooperative projects is needed to avoid collusion. I believe a better understanding of the innovation incentives will improve the political systems already developed to support cooperative R&D projects.

https://www.cairn.info/revue-d-economie-politique-2003-1-page-125.htm
https://en.wikipedia.org/wiki/Open_innovation
http://www.etsi.org
http://www.strategie-aims.com/events/conferences/14-ixeme-conference-de-l-aims/communications/2545-strategie-de-recherche-et-developpement-quelques-elements-pour-un-agenda-de-recherche/download

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Thibault Hannesse
I would like to stress the fact that there is a significant difference between the social benefits from R&D and the benefits available to the innovator himself. Therefore, there's also a gap between social and private incentives to invest in R&D because a private, profit-maximizing firm will not take into account the effects that its actions have on the welfare…
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I would like to stress the fact that there is a significant difference between the social benefits from R&D and the benefits available to the innovator himself. Therefore, there’s also a gap between social and private incentives to invest in R&D because a private, profit-maximizing firm will not take into account the effects that its actions have on the welfare of consumers. This gap plays a role in the decision whether or not to cooperate in R&D.

The spread between private and social incentives to conduct R&D can be caused by a wide range of economic and political forces. One of these forces are, as mentioned in the text, the technological spillovers. These spillovers are beneficial for the society as a whole and should encourage the firms to invest more in R&D. But if one firm can employ the research done by another firm without purchasing the right to do so, it will automatically decrease the private investment incentive of that firm because it will not count the spillover as a benefit. In that case, we face a situation where the private incentive is lower than the social incentive to invest in R&D.

Another source of divergence are the R&D patent pools. These patent pools induce individual firms to reduce their investments in R&D, even though it would be socially beneficial not to do so because they ensure greater competition in the post-innovation market.

When it comes to making a decision whether or not to cooperate in R&D, the spread between social and private incentive remains there. Generally speaking, R&D joint ventures ensure greater competition in the post-innovative market. Therefore, we can say that they are socially beneficial. But in a market system, it is not always beneficial for private firms to combine in a single R&D joint venture. And even if these profit-maximizing firms voluntarily decide to form R&D joint ventures, they will often not adopt the socially optimal structure of R&D. That’s why I think it is important to consider the private/social incentive as a factor affecting the choice between cooperation and competition in R&D.

Sources:

STEPHEN M. (1994), Private and social incentives to form R & D joint ventures, Review of industrial organization, Kluwer Academic Publishers

KATZ, M. (1990), R&D cooperation and competition, Brookings Papers: Microeconomics, University of California

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Pauline Naveau
This article gives information about the choice a company has to make between R&D cooperation and R&D competition. R&D cooperation between firms brings many advantages such as pooling risks and sharing costs (IBM’s Watson Research Center, HP Labs, Bell Labs, and GE’s Global Research Center have indeed decided to gather their labs). For example, in 1992, about 37 per…
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This article gives information about the choice a company has to make between R&D cooperation and R&D competition. R&D cooperation between firms brings many advantages such as pooling risks and sharing costs (IBM’s Watson Research Center, HP Labs, Bell Labs, and GE’s Global Research Center have indeed decided to gather their labs). For example, in 1992, about 37 per cent of firms in the German industry had formed inter-organizational arrangements in R&D with one or more partners to develop new products jointly (https://core.ac.uk/download/pdf/6928659.pdf). Moreover, according to Alain Vas and his strategy course (UCL), an alliance between two firms that cooperate can be of two types : “co-integration”, and “pseudo-concentration”. The first type occurs when every firm brings similar skills to make economy of scale on a step of the production process. For example, Renault and Peugeot gathered their strengths for the V6 motor, even if their final products were in competition in the market. The second type of alliance is when companies develop, product and commercialize a common product, from the same industry. The Concorde, that was developed by the French Sud-Aviation and the British Aircraft Corporation, can illustrate that case.

However, a publication by Bernard T. Ferrari and Jessica Goethals argues that rivalry can spur innovation. According to them, “Embedding rivalry in a culture where what’s celebrated most is the outcome—a better product or service—can be a powerful positive force.” But rivalry is here to understand as a comparison, that do not diminish one at the expense of the other (concept of “paragone”).

Thus, the best way to spur innovation is R&D competition or cooperation, to choose according to different aspects of the situation.

One main factor is the spillovers, that I can illustrate with the relation between countries : a country’s total factor productivity depends not only on domestic R&D capital but also on foreign R&D capital. The estimates indicate that foreign R&D has positive effects on domestic productivity, and that these are stronger the more open an economy is to foreign trade. (http://www.sciencedirect.com/science/article/pii/001429219400100E, European Economic Review).

Another factor could be the ability to combine these two concepts. As Ferrari and Goethals wrote, a solution to combine cooperation and competition is to build two or more teams within the company, working on the same project, at the same time. For example, the innovative GE90 (aircraft engine) was developed by two independent teams. (http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/using-rivalry-to-spur-innovation)

Another key element in balancing R&D competition and R&D cooperation is the possibility to compete with a company. For example, Intel (INTC) does have substantial technological rivals, but their research and development budget (upwards of $7 billion annually) is difficult to compete with (http://www.dividendmonk.com/7-companies-with-unrivaled-economies-of-scale/).

Then, a factor that influences the choice of R&D cooperation or R&D competition is the fear that partners of a firm steal the know-how of another. The development of new products requires indeed an active search-process involving several firms and institutions to tap new sources of knowledge and technology (https://core.ac.uk/download/pdf/6928659.pdf). Exchange of information and resources with different companies are important points in the innovation process. By this, firms become more and more dependent on the know-how of other companies and institutions, as far as it allows them to gain expertise which cannot be generated inhouse.

Finally, a barrier to the cooperation between two firms can also be the unification of heterogeneous structures, the coordination of distinct organizational routines and the combination of complementary assets and resources. Enterprises could thus choose the competition to spur the innovation.

In conclusion, choosing R&D competition or R&D cooperation depends on many factors, depending on the situation, the sector and the existing competition.

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Thomas Heremans
What strikes me with this article is the fact that firms have to adopt a cooperation or competition behavior concerning R&D expenses depending on a number of factors influencing the decision but that no middle ground between those extremes is being conceived. Although, there are plenty of examples where firms are both R&D competitors and cooperators. I have chosen the…
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What strikes me with this article is the fact that firms have to adopt a cooperation or competition behavior concerning R&D expenses depending on a number of factors influencing the decision but that no middle ground between those extremes is being conceived. Although, there are plenty of examples where firms are both R&D competitors and cooperators. I have chosen the Apple and Samsung case to illustrate my point.

As many of you might have known, Samsung has been making most of the chips found in Apple iPhones while the two firms are fierce competitors on the smartphone market. This situation is, I believe, a form of both R&D cooperation and competition. Indeed, on the one side Samsung is the one making the R&D efforts to create the chips required by Apple. The important point here is that Apple’s success is partly due to the very high compatibility between all the internal components of its devices, both hardware and software. However, in order to achieve such a high degree of compatibility while another firm is making a specific component of the product, Apple has no other choice but to share a maximum of its own R&D progress with Samsung to make sure that the chip fits perfectly with all the other components. In this way, the two firms have clear incentives to cooperate and share R&D progress in very closely related technological fields to make their contract as much profitable as possible since a well-working device is the objective of both companies.

On the other hand it is clear that Samsung will benefit from this cooperation as it is going to use some of its learning on the technology to improve its own product line of smartphones. From this perspective, the two firms are competing with each other. However, I don’t think that we can call this a “stealing of spillovers” since Samsung also contributed, if not more, to the creation of the knowledge but still it is Apple who turns the chips into proprietary products.
Of course, the situation is certainly far more complicated and it is shown in the numerous lawsuits involving the two companies concerning patent infringement. Finally, one should not forget how time affects the relationship. Apple started working with Samsung because it did not have the technology to produce the chips but now that is has, the cooperation may end one day or the other.

Sources :
http://bgr.com/2016/02/19/apple-iphone-chips-feature/
http://www.digitaltrends.com/computing/how-apple-quietly-built-a-silicon-empire/
https://en.wikipedia.org/wiki/Apple_Inc._v._Samsung_Electronics_Co.

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Moeko Miyai
According to this article, there is no clear answer which is better R&D cooperation or competition. Some people say that R&D cooperation is better because firms handle their R&D well. Others say that R&D competition is better to accelerate innovation. The optimal answer depends on the environment, such as spillover of R&D. The large spillover of R&D will leads more…
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According to this article, there is no clear answer which is better R&D cooperation or competition. Some people say that R&D cooperation is better because firms handle their R&D well. Others say that R&D competition is better to accelerate innovation. The optimal answer depends on the environment, such as spillover of R&D. The large spillover of R&D will leads more R&D when it is a cooperation situation, whereas the small spillover will leads less R&D when it is a competition situation.

I considered what is R&D spillover. I suppose different industry field, science and general firms (I am not sure what should I say in general term). I think a lot of scientists research to invent an epoch-making invention, or to obtain award, or to contribute to society by improving technology. On the other hands, general firms like restaurants and super markets focus on own profits. They strive to make their profit maximize. Comparing both situations, the former would prefer R&D cooperation to competition because its spillover would be large enough. Indeed, it is often seen cooperation research and academic-industrial collaboration. It does make sense to cooperate to invent and to contribute society especially in medical science. However, the latter would choose R&D competition, because it will be hard to make larger profit if they cooperate each other.

As article mentioned, the degree of R&D spillover affects the choice between R&D cooperation and competition. I think market structure also affects the choice. For example, the convenience store market in Japan is oligopoly. Seven-eleven and Family Mart and Lawson are major firms in the market. Seven-eleven occupied 40% of the market, and others’ market share is nearly same. Under such situation, they would not choose cooperation R&D, because there is any motivation to cooperate R&D. The idea of convenience stores is to be convenient for consumers, so they sell almost same products, and they open 24 hours. To make profits, they have to make differences each other, such as the product of private brand and main targets. As only differentiation makes firms profit in convenience stores market, they would not choose R&D cooperation.

Reference
https://foodindustry.asia/top-three-trends-shaping-convenience-retailing-in-asia
http://www.csnews.com/product-categories/foodservice/guy-jeff’s-excellent-adventure-japan
http://www.thecsuite.co.uk/cio/learning-development-cio/university-and-business-ip-cooperation-to-boost-uk-innovation/

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Stephanie Rodriguez Vizcarra
What calls the most attention in this paper is the big influence that spillovers can have when we are faced with the dilemma of cooperation vs. non-cooperation on R&D. Indeed, we may be inclined to think that whenever spillover increases, the profit of the firm decreases, since the competition in the product market increases. What we do not see is…
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What calls the most attention in this paper is the big influence that spillovers can have when we are faced with the dilemma of cooperation vs. non-cooperation on R&D.

Indeed, we may be inclined to think that whenever spillover increases, the profit of the firm decreases, since the competition in the product market increases. What we do not see is that spillover could also be benefical, in the way that it could increase new ways of using the invention. Hence, we need to see whether and to what extent the gain on expanding the scope of a discovery is bigger than the loose from increasing the competition.

Even though most of us might not believe it, spillovers could benefit the firms. They just need to grasp the opportunity and develop all the new possibilities available. In this sense, cooperation is more desirable.

Furthermore, we can look for scenarios where cooperation can coexist. Some examples given by Damino Bruno and Avi Weiss are the agreement on the amount of money spend on research, by setting up joint research facilities that will allow the existence of some synergies and as a consequence the non-duplication of research efforts and by setting sharing agreements, etc.

Source
DAMINIO, B and AVI, W. Cooperation and competition in a duopoly R&D market. Online on http://www.biu.ac.il/soc/ec/wp/8-01/duopoly.pdf

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Marc Abou Jaoude
Before offering other factors that may influence the choice between cooperation or competition, I’d like to echo what I perceive as a very important argument that was mentioned in the blog post: Cooperation incentivises firms to invest more in R&D as firms will be sure that they are not engaged in a “winner take all’ environment. This is important because…
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Before offering other factors that may influence the choice between cooperation or competition, I’d like to echo what I perceive as a very important argument that was mentioned in the blog post: Cooperation incentivises firms to invest more in R&D as firms will be sure that they are not engaged in a “winner take all’ environment. This is important because it acts as a guarantee to the firms that their resources will not be wasted in case they don’t reach the innovation before their rivals. The shared risk aspect is very important in understanding why rivals cooperate in R&D.

Another important factor to explain cooperation would be the creation of synergies. When firms cooperate, they share their know-how and that often leads firms to be able to further streamline their costs of production. Cooperation on the R&D front may be able to merge the most efficient aspects of two firms in order to pursue a common innovation and goal. An example of the synergy effect would be Nissan and Renault who have been working together on R&D (and on other fronts) primarily since 1999.

The previous argument however may also prove to defend R&D competition. 2 rival firms are often reluctant to cooperate as they may have a fear that one firm will steal a particular know-how from the other firm that allows them to gain a competitive advantage. As an example I will use Burger King’s proposal to team up with McDonalds. McDonalds turned down the opportunity to create the legendary ‘McWhopper’, a blend between the 2 leading burgers of both fast food chains, because, allegedly, of fears that it would hinder their “friendly business competition.”

I know that the previous example isn’t technically an example of a proposed cooperation in R&D but I feel that it does highlight the point I was trying to make very well: Competitors will often be wary of working with their rivals. McDonalds no doubt didn’t want to share their secret sauce recipe with their rivals.

Furthermore, this links back to a term explained by Cohen and Levinthal in their 1990 paper “Absorptive Capacity: A new perspective on Learning and Innovation”. They referred to absorptive capacity, a firm’s ability to process and utilize new information which influences their innovative capabilities. The reason this ties back to my previous point is because cooperation bears the risk of a rival firm, with a good absorptive capacity, using the new know-how acquired from cooperating to gain a competitive edge. This may remove a firms’ incentive to cooperate with its rival in R&D.

Another influencing factor is the role of public intervention. Cooperation in R&D can in some cases be a hindrance to competition. If for instance 2 of the leading firms on a market decide to cooperate on an innovation that could kill off all other competitors in the market, then competition authorities may step in to stop the cooperation. In this case, the ‘choice’ of cooperation or competition would be taken by the competition authorities.

Sources and complementary readings:

More on the Nissan-Renault alliance: https://group.renault.com/groupe/un-groupe-une-alliance-des-partenariats/un-groupe-fort-de-son-alliance-unique/

Article consisting of McDonald’s CEO’s comments on the potential temporary cooperation with Burger king: http://money.cnn.com/2015/08/26/news/companies/mcwhopper-mcdonalds-burger-king/

Cohen, W., Levinthal, D., 1990. Administrative Science Quarterly, Vol. 35, No. 1, Special Issue: Technology, Organizations, and Innovation (Mar.,1990), pp. 128-152.

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Charles Heymans
R&D cooperation and competition undoubtedly have their strengths and drawbacks. I think it’s important to notice that, the behaviour of two firms, will not only have an impact on the firms themselves, but on the society as a whole too. While competition can have significant advantages for the consumer who gets access to a wider panel of goods, this…
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R&D cooperation and competition undoubtedly have their strengths and drawbacks. I think it’s important to notice that, the behaviour of two firms, will not only have an impact on the firms themselves, but on the society as a whole too. While competition can have significant advantages for the consumer who gets access to a wider panel of goods, this same competition will lead to higher costs for the firms ( duplicate of costs) than a co-operation would have. I therefore wanted to analyse the competition/cooperation phenomenon from different points of view starting with the companies, followed by the society (consumers) and the role of the government in this process.

Overall I would argue that cooperation benefits firms, no matter their size. Smaller firms could assemble their complementary skills which would lead to a significant reduce in the waste of ressources ( sharing investment costs) and a faster innovation. This will permit them to grow in their industry. While it is evident that small firms may win experience by working along a big company with a great market share, bigger firms should not underestimate the benefits they could have from working with smaller ones eventhough most of them don’t . The example of Kodak is here interesting to discuss. Kodak’s position as a leader has made the company completely blind to outsiders. The firm hasn’t been able to see digital cameras as a disruptive product. A smaller company with a different way of thinking would probably have helped to think outside the box, to be more open-minded. A strong culture in a company with people thinking the same way is dangerous when there is a change in the market.

However, Cooperation is recommended when both firms have complementary assets. The alliance of Renault and Nissan is a good example of that since both firms had different markets. Their alliance has permitted them to “conquer” Latin America. This would have been impossible independently. Besides that we can notice that diesel motors produced by Renault are on Nissan cars and other motors produced by Nissan are on Renault cars. Cooperation between two similar firms operating on similar markets would be more problematic, but is sometimes necessary. Indeed, each firm would have the incentive not to tell their best ideas since they want to keep the benefit for them. The firm may also free-ride and will not send its best employees since the other firm is there anayway with its R&D team. Although there are some downsides, cooperation should be done if the product has a low product life cycle in order to share the R&D costs.

As I said in the introduction, the effects of the cooperation will have an effect on the whole society. Consumers don’t receive the same benefits as the firms do. Indeed, cooperation leads to a lower level of innovation if firms are reluctant to share their best ideas to each other. Moreover, some alliances could become really powerful and abuse from their position by charging a really high price.
Governements will have all their importance here. Strict regulations must be done to avoid cartels and limit the cooperation only to cooperation of skills and not on prices in order to make the whole society better. It’s for this reason competition laws exist to avoid that some companies may abuse from their leader position.

http://www.forbes.com/forbes/welcome/?toURL=http://www.forbes.com/sites/chunkamui/2012/01/18/how-kodak-failed/&refURL=https://www.google.be/&referrer=https://www.google.be/
https://blog.alliance-renault-nissan.com

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Hattori Tatsuaki
Considering which to choose R&D cooperation or competition, we have to plug in a lot of variables, such as number of firms, the scale of R&D, how beneficial it will be, or everything. Taking care of everything is, at least for me, impossible. Thus, let me assume there are only two firms (namely duopoly condition) and there is no spillover.…
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Considering which to choose R&D cooperation or competition, we have to plug in a lot of variables, such as number of firms, the scale of R&D, how beneficial it will be, or everything. Taking care of everything is, at least for me, impossible. Thus, let me assume there are only two firms (namely duopoly condition) and there is no spillover. Both of them can invest in three areas A, B, and C, and Firm1 has research advantage in A and Firm2 has in B. In the area C, two firms have the same level of knowledge.
Under such condition, does Firm1 have incentive to invest in area B or Firm2 have incentive to invest in area A? Or Firm1 have incentive to cooperate R&D in A? I don’t think so because they can make more profit when they invest in their specialized area and they should protect their knowledge to be monopolist in certain area to gain maximized profit. Someone will say this conclusion is due to not considering spillover effect and if there is, Firm1 choose cooperate in area A because knowledge spillover allows Firm2 to use the innovation and Firm1 can’t become monopolist. Thus choose cooperation and pooling risk and decrease cost is more efficient way for Firm1. However, if competitor, in this case Firm2 can enjoy large spillover benefit, it will not accept cooperation even if Firm1 offer because without cooperation, Firm2 can use innovation. So Firm2’s optimal strategy might be wait and mimic Firm1’s technology.
Thus, my opinion is, cooperative R&D will exist when firms knowledge level is the same in certain area. Otherwise, they should invest in their fields of expertise. Since cooperation increase the probability of success in investment and it can be risk pooling, it promote them to invest in R&D. Of course, my assumption is far from the real situation. If there is spillover, we have to consider its size of effect. In addition to this, the number of firms is very crucial factor. If there are three firms and one of them is dominant and the others are small, smaller firms might have incentive to cooperate to compete to dominant one. So I hope that my opinion give you the new point of view and help your thinking.

References
“Cooperative and Noncooperative R&D in Duopoly with Spillovers” (American Economic Review 78: 1133-1137; quoted 1883 times according to Google Scholar consulted on November 8, 2012).
Leveque Meniere(2004) Creative Disruption

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Edouard Fabri
The choice between competition and cooperation depends on many factors, including time which I will further develop here. It has a dual character regarding whether or not pooling the resources together would benefit the two competitors. Cooperation could indeed increase as well as decrease the time needed to allocate resources around the innovation, research the idea and further develop it.…
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The choice between competition and cooperation depends on many factors, including time which I will further develop here. It has a dual character regarding whether or not pooling the resources together would benefit the two competitors. Cooperation could indeed increase as well as decrease the time needed to allocate resources around the innovation, research the idea and further develop it. Like all the other factors stated in the article, the time factor depends on the circumstances, and especially here on similarities and differences about the culture as well as the stakeholders.

Regarding the stakeholders, the partners should have sufficiently similar kind of relationships so that synergistic effects can be created. This is facilitated when they start with common stakeholders with which they have already good business relations. On the other hand, starting with different kind of stakeholders can also empower the cooperation if the relationships are complementary and mutually reinforcing each other. It would then allow the corporation to have a greater weight and more recognition in the industry.

Regarding the culture of the two partners, the success of the cooperation is more evident as the companies cultures are matching. It allows then employees and managers to use similar ways of working on the innovation, whether regarding the creation itself or its implementation. Finally, it is essential that both the two firms agree on the values and goals associated to the innovation and are sufficiently open to create a common culture around the cooperation. Under these conditions, the firms are more easily working with a common R&D strategy regarding the innovation itself, the way to manage people and the overall organization around R&D.

A typical industrial sector where companies associate is the car industry, where the innovation department is continuously busy with research and development in order to come up on the market with something new. In this highly competitive sector, firms are used to cooperating and pooling their resources together and take the best out of the two companies to cover a part of the value chain. A more specific example is the Renault–Nissan alliance or strategic partnership created in 1999. It is for example working on zero-emissions vehicles with a first car launched in 2010 and has even opened a Silicon Valley office in 2013. According to the Harvard Business Review (July 2012), “Renault-Nissan has proactively embraced frugal engineering and become one of the world’s leading producers of both electric cars as well as low-cost vehicles — two of the fastest growing and most promising market segments in the global automotive sector”. The cooperation is for the moment a success, even if both Renault and Nissan keep their own cultural identity, as it is stated on Nissan’s official website “we have mutually benefited from cross-cultural experiences between companies and nations. These relationships have taught us about different perspectives and tastes. We believe that embracing and leveraging this cultural and national diversity gives us a global competitive advantage”. More information regarding the cultures is available on the article of the Economist ‘Managing across cultures’ described by the CEO Carlos Ghosn (18.11.2005). The Renault-Nissan example shows that cooperation for innovation and synergistic effects is in some case needed and that culture is an important factor to take into account.

Sources:

http://www.nissan-global.com/EN/COMPANY/DIVERSITY/CULTURE/

https://exchange.cim.co.uk/blog/combining-cultures-at-renault-nissan/

https://hbr.org/2012/07/frugal-innovation-lessons-from

http://www.economist.com/node/5156760

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Sambit Das
The article points out to the knowledge spillover effect that could influence the decision of competition vs. co-operation. In today’s fast evolving world, a firm can’t focus on all aspects of innovation, and should rely on its environment to a large extent. Complementary skills and resource sharing ensure that a firm focuses on certain kinds of innovation while relying on…
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The article points out to the knowledge spillover effect that could influence the decision of competition vs. co-operation. In today’s fast evolving world, a firm can’t focus on all aspects of innovation, and should rely on its environment to a large extent. Complementary skills and resource sharing ensure that a firm focuses on certain kinds of innovation while relying on others for the rest. However, there are transaction charges in such a case, and it will depend on whom the collaboration is being evaluated with. If the co-operation is with a supplier or a distributor, the extent of mutual benefits may ensure that this cost remains low. However, if even one party has a higher bargaining power, the transaction costs may cause the overall benefits to be very low. If I were to think of it, I see crowd-sourcing also as a case where co-operation may be better than competition. A member of the crowd can use the platform of the firm and get his or her benefits in return, whereas an attempt to directly compete with the firm may entail huge costs.
Another factor which may be decisive is – what is goal that needs to be achieved. If the motive of the R&D is to come up with a technology that gives competitive advantage, competition instead of co-operation may be the correct choice. Innovations that add to the firm’s product portfolio or enhancements aimed at increasing sales may best be done without any collaboration with a competitor. Many a times, research JVs for this purpose end up with legal issues about ownership of the outcome and transaction costs may be huge in such a case. On the other hand, facility sharing or resource sharing to reduce costs may come through collaboration rather than competition. This is where economies of scale come into the picture. One of the papers listed below also provides empirical evidence of this.

References: http://ftp.zew.de/pub/zew-docs/dp/dp06059.pdf
http://www.sciencedirect.com/science/article/pii/S1090944304000584

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Rafaël Vansteenberghe
Many factors can affect the choice between cooperation and competition in R&D. If we take the point of view of the enterprise, which is often profit-driven, only the amount of R&D produced at the end could not be the most important factor. Indeed, the company could consider how much profit the R&D progress will give with or without cooperation. This…
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Many factors can affect the choice between cooperation and competition in R&D. If we take the point of view of the enterprise, which is often profit-driven, only the amount of R&D produced at the end could not be the most important factor. Indeed, the company could consider how much profit the R&D progress will give with or without cooperation. This is the point I would like to develop below.
If we take for example an innovation in the production process, it will probably lead to more profits by giving a new, less costing production technology. However, this R&D process is linked to all kinds of costs that reduce the final profit for the enterprise. Those costs will be different whether the enterprise is cooperating or not with its competitor in the R&D process.
If a firm (firm 1) is considering the option of collaborating, it should first analyze the positive factors. These positive factors can be a decrease in the money invested in R&D, a decrease in time needed to find the new technology, being sure that the competitor will not find the innovation first, etc…
However, this collaboration leads to negative factors and additional costs such as increasing communication costs to collaborate properly with the other firm, the risk of disclosing confidential informations to the competitor, or other indirect costs. Above all, the most negative aspect of the collaboration is a non-exclusivity of the technology. Indeed, when two firms collaborate to find a new technology, the positive results of it will profit not only one, but the two of them. This consequence can be seen as a cost for firm 1 as the additional profit made thanks to the innovation will be divided by 2.
Firm 1 has therefore an incentive to collaborate only if the cost reduction induced by the positive factors are greater than the loss of earning induced by the impossibility of taking out a patent for the new technology.
So, to conclude, when firm 1 is thinking about cooperation in R&D, it should not only think about the amount of R&D produced by the cooperation/competition but also about the final profit (reduced by many costs) that will result from the process.

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Diana Munster
As underlined in the article, the level of spillover seems to be of great significance when companies face the choice between cooperation and competition regarding their research and development (R&D). However we could also wonder if there are any other factors that influence the choice between cooperation and competition in R&D? First of all, when facing such a situation, I…
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As underlined in the article, the level of spillover seems to be of great significance when companies face the choice between cooperation and competition regarding their research and development (R&D). However we could also wonder if there are any other factors that influence the choice between cooperation and competition in R&D?

First of all, when facing such a situation, I am the opinion that the company has to take into account the cost requirement. Indeed, some sectors are “cost consuming” (e.g. pharmaceutical). This means that the firm needs to invest a large amount of money in their research and development for the sake of competition. If the cost required is high, the company should cooperate with the incumbent in order to share this cost.

Besides, the risk usually associated with the innovation should be well assessed and foreseen by the company. In case there is a risk to invest in research and development, the company should opt for a collaborative approach with a view to reduce the given risk. Indeed, research and development can turn out to be costly and the final result is not always ended by a success. Therefore the company has to be able to deal with such a failure. An unfruitful research and development might have serious financial implications for the firm, but it can also damage the whole brand. Therefore, it can be of judicious decision to share the risk with its competitors.

The knowledge necessary to carry out the research and development can be perceived as another incentive that lead to cooperation between companies. It may be valuable for a company to share its knowledge with a firm involved in another sector. Such cooperation can pave the way to innovation and lead the company to expand its range of products. Philips is a great example that illustrates this argument. Philips has signed more than 30 agreements with leader firms, which are present on other markets. For instance, Philips has an agreement with Sara lee (Douwe Egberts). This first cooperation led the firm to develop the so-called coffee machine Senseo. The firm has also a cooperation agreement with Visa that has been translated into a new technology for chip without any contact. As we can read on their website, Philips gets the most out of its several cooperation agreements. Indeed, this approach has allowed the firm to market several products, which they would not have been able to develop on their own because of the lack of knowledge. As a result, the firm has diversified its range of products and become famous in other sectors that were not its chosen field several years ago. In addition to being a great deal for the firms, this alliance also benefits to consumers who can enjoy new technologies that ease their daily life.

On top of all this, collaboration can generate a considerable time saving for a company. This is especially the case of sectors like the pharmaceutical and health industry where researches usually take several years. Therefore, the company has a vested interest in sharing their knowledge and R&D programme with another firm. Globally, when the firm has a limited period of time and seeks to launch a product as soon as possible, they should opt for collaboration. The share of experience and knowledge would allow companies to accelerate the whole production process and to develop a high quality product faster than if they would have done it on their own.

Finally, I would say that sharing research and development with competitors should depend on the degree of control the company wants to maintain on its own innovation and research. Indeed, the more level of control a company wants to keep, the less it will be attracted by cooperation. If the company wants to keep control on its innovation, the firm can be tempted to get over a collaboration and compete on its own. In this respect, the recent talks between Apple and the German car manufacturer BMW provides a sound example. Executives of both companies were reported to have kicked-off negotiation over a potential collaboration for the development of a high-tech electric car. However the talks did not come to a conclusion as Apple wanted to develop the car on its own. What is more, BMW was keen on producing some spare parts of the car but unwilling to share its specialized knowledge with the US firm. This example demonstrates that collaboration is not always easy to implement due to the various, and some times incompatible, interests at stake.

To conclude, the spillover effects seems to play a key role in the firm’s decision to cooperate or to compete when it comes to research and development. However, it must be reminded that other factors can also influence the decision. In view of the foregoing, it seems that the decision will be based on the goals and requirements of the company but also on the characteristics of the sector in which the firm is involved.

Sources

JEAN, S. (2015). Apple Inc (AAPL) and BMW to resume electric car collaboration. The next digit. Online on http://thenextdigit.com/24685/apple-aapl-bmw-resume-electric-car-collaboration/. See the 14th October 2015.

Philips website: http://www.philips.be/fr/about/company/global/partsofthewhole/alliances/index.page

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Coeck Chesley
Today, R&D is one of the key point to lead a market. Indeed, many firms try to be at the cutting edge of technology. But is the competition in R&D between the firms the good way to do it? Is cooperation better? As seen in the article, it depends on a lot of factors. But maybe is it too simplistic…
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Today, R&D is one of the key point to lead a market. Indeed, many firms try to be at the cutting edge of technology. But is the competition in R&D between the firms the good way to do it? Is cooperation better? As seen in the article, it depends on a lot of factors. But maybe is it too simplistic and it reduces our view on the R&D and spillovers aspect.

I think it is important to consider other facts. For example, and we can easily see it in the mobile competition market, it is important to take account of the costs. A firm can decides to invest in R&D but at which cost? We have seen during the previous classes that it is only possible when the revenues are larger than the fixed cost. Apple is a good example I think. At its beginning, Apple try to releases new products like every firms but which didn’t work at all. It costs money to Jobs and Wozniak who were the “most visible founders”. But they didn’t give up and were looking for new funds and new opportunities (which can be possible with some subsidies, tax deduction …). Thanks to their determination (another factor), we could see a visible increase in sales which as a huge impact on the company size and on the revenues. Afterward, Apple could compensate their R&D costs by their revenues.

In my opinion, we could also think about the history of the market. Indeed, there is a lot of markets were a lot of firms failed to release their products despite the R&D investments. We can think about some gaming companies like Nintendo or Sony. The competition about those firms was already too strong that they wanted to release a new product without thinking about consequences on the costs. Maybe should they cooperate on this point?

A last point may be the cultural shock between companies. A company which is not agree with some point of another one will not be motivated to join and cooperate with the competitors. Another case is the size of the company. A large company will have more difficulties to cooperate with a smaller one which will bring less profit.

To conclude, we can say that there exist a lot of factors. R&D competition or cooperation is not only affected by the spillovers. A firm has to think strategically about their choices and the consequences of it.

References:

http://apple-history.com/h1
http://www.macworld.co.uk/feature/apple/history-of-apple-steve-jobs-what-really-happened-mac-computer-1984-3606104/
http://www.businessinsider.com/10-old-apple-products-that-totally-failed-2013-11?op=1&IR=T
http://www.polygon.com/2015/1/28/7928919/nintendo-wii-u-sold-total-2012-fiscal-results

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Séverine Mousset
In our day, R&D is essential to be innovative. That is why the businesses, in all industries, are investing heavily in this department. R&D is a department that requires large investments and, above all, that takes time. This is why some companies are moving towards cooperation in R&D with other companies in the same sector or not. Indeed, the transfer of knowledge…
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In our day, R&D is essential to be innovative. That is why the businesses, in all industries, are investing heavily in this department.

R&D is a department that requires large investments and, above all, that takes time. This is why some companies are moving towards cooperation in R&D with other companies in the same sector or not.

Indeed, the transfer of knowledge can be done in several ways: either between two companies in the same sector or between two companies from different sectors but complementary in some way.

Cooperation has many advantages because it helps to spread the costs, but also the risks. Moreover, cooperation is positive for the society as it avoids unnecessary expenses (i.e. when two companies lead to the same result, it is a waste of money because only one company could focus on this research) and it allows some significant time savings in the discovery of key innovations (i.e. scientific laboratories working together will discover a crucial vaccine faster than if they worked each on their side).

But there are still many companies that choose the competition in R&D rather than cooperation. The main reason is the profitability of the discovery. Indeed, it is sometimes difficult to proportionally divide the profit of the discovery with respect to investments made by the different companies of the cooperation. It is mainly for this reason that the competition is still present in the area, in order to allow the company to recover its initial investment and to make a profit in order to have funds for the future researches.

From my point of view, cooperation is essential for advanced technology and especially scientific. Too many diseases remain untreated (here is a concrete example that is important to me, as for many others). To find the best treatment and in the shortest time, cooperation is crucial between different companies. But, through this cooperation, some companies cannot work less than others by relying on the results of other companies of the cooperation.

So there will always be pros and cons to cooperation as in the competition, although for the society, cooperation seems to me the way to follow.

References:

http://www.jstor.org/stable/1807173?seq=1#page_scan_tab_contents

https://www.google.be/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCMQFjAAahUKEwjIn6uxw8HIAhVD7BQKHU2UDDs&url=http%3A%2F%2Fweb.iese.edu%2Fbcassiman%2Faerversion-final.pdf&usg=AFQjCNHPOQYx4fIr9zrx4XSP7MjFRULw3A&sig2=6lPRaqgyTE6zBXmljKoB7g

https://www.google.be/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCMQFjAAahUKEwjIn6uxw8HIAhVD7BQKHU2UDDs&url=http%3A%2F%2Fweb.iese.edu%2Fbcassiman%2Faerversion-final.pdf&usg=AFQjCNHPOQYx4fIr9zrx4XSP7MjFRULw3A&sig2=6lPRaqgyTE6zBXmljKoB7g&cad=rja

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Auguste Debroise
What is best for the innovation? A cooperative approach? A competitive one? It’s a difficult question, because it depends on several elements: type of market, number of competitors, level of spillover on innovation (as says in the text), etc.… On which elements can we base our decisions at the end? How to choose? I will juste try here to give some…
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What is best for the innovation? A cooperative approach? A competitive one? It’s a difficult question, because it depends on several elements: type of market, number of competitors, level of spillover on innovation (as says in the text), etc.…
On which elements can we base our decisions at the end? How to choose? I will juste try here to give some other elements that those given in the text.

A first element is the type of relations we nourish with our rivals: Do we compete hard since years? Do we already had common projects? If we were always on a fight with a rival, it can be very difficult and very costly to engage negotiations, maybe more costly than the benefits we will receive. In this way, there is no other choice than a competitive approach.

Secondly, I think it depend of the scale of the innovation investments required for the project. With a very costly investment, it can be good to join forces to accelerate the process of R&D, for example. But with less important investment, again the negotiation and the organization costs can be more important than the benefit we can expect to get.

To finish we can also discuss the type of market. For example, in the mobile phone market, where is the incentive to cooperate? Yes, If Samsung and Apple cooperate, they can find a better product, or a new technologies to put in their phone, probably faster than if they act alone. But what will be the point? They are close rivals, and if they both have the new technologies, no one can take advantage of it. It will be better to work alone, and to propose a new technology than the otter will not have. Thus, in a market where firms oppose product where the new technology is a factor of differentiation, I think the cooperation might be useless.

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Melissa Boels
This article gives us information about the choice of a company to make cooperation or competition in R&D. Cooperation allows pooling of risks, sharing of costs, elimination of duplication of efforts, pooling complementary skills and exploiting econonomies of scale. « R&D cooperation leads to more R&D than R&D competition when spillovers are large but to less R&D when spillovers are…
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This article gives us information about the choice of a company to make cooperation or competition in R&D. Cooperation allows pooling of risks, sharing of costs, elimination of duplication of efforts, pooling complementary skills and exploiting econonomies of scale. « R&D cooperation leads to more R&D than R&D competition when spillovers are large but to less R&D when spillovers are small ».
Competition is a good way to use rivalry to prompt innovation and develop better products and services. Cooperation leads to larger investments in R&D that benefits society as a whole. But there exist other factors that influence this choice.

First of all, joint R&D is used to complement internal resources in the innovation process, improving the innovation input and output measured by the intensifying of in-house R&D or the realization of product innovations. About the input side, the intensify of in-house R&D also stimulates the probability and the number of joint R&D activities with other firms and institutions. 1

Furthermore, we can also observe that large firms and firms in the chemical and pharmaceutical industry are more likely to be involved in industry science links. As a matter of fact, it is easier for a firm to cooperate when the risk is low, it allows to share costs.2

Then, we also notice there are heterogeneities in the determinants of innovating firm’s decisions to share in R&D cooperation, differentiating between four types of cooperation partners : competitors, suppliers, customers, and universities and research institutes. Determinants of R&D cooperation differ significantly across cooperation types. 3

Moreover, we know that information flows and spillovers have an impact on R&D cooperation, but we can also observe that other factors like firm size, cost and risk sharing, and complementarities can also have an effect on the decision made by a company to cooperate or not. 4

Finally, firms conduct R&D because it can generate the knowledge to produce new products or existing products at lower cost. Empirical studies found that the social rate of return was approximately ten times the private rate in the scientific instruments industry. « The gap between social and private incentives arises because an individual profit-maximizing firm ignores the effects that its actions have on welfare of consumers and the profits of other firms. » 5

In conclusion, we can say that the decision to make cooperation or competition in R&D depends on a lot of factors like the circumstances, the types of company, the firm size, the risks, the complementarities, the spillovers, the context, the incentives and many more.

Sources :

1 : W Becker, J Dietz – Research policy, 2004 – Elsevier, http://www.sciencedirect.com/science/article/pii/S0048733303001276
2 : R Veugelers, B Cassiman – International Journal of Industrial Organization, 2005 – Elsevier, http://www.sciencedirect.com/science/article/pii/S0167718705000251
3 : R Belderbos, M Carree, B Diederen, B Lokshin… – International Journal of Industrial Organization 2004 – Elsevier, http://www.sciencedirect.com/science/article/pii/S016771870400102X
4 : A López – International Journal of Industrial Organization, 2008 – Elsevier, http://www.sciencedirect.com/science/article/pii/S0167718706001391
5 : ML Katz, JA Ordover, F Fisher… – Brookings papers on …, 1990 – JSTOR, http://www.jstor.org/stable/2534782?seq=1#page_scan_tab_contents

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Emelda Woutou Njiki
There are many factors that will influence the decision between cooperation and competition between firms.As rightly stated from the above article, that R&D cooperation across firms have a lot of advantages centre on cost reduction,economies of scale, elimination of useless duplication of efforts... Cost advantages may be achieved by costs sharing. Moreover fixed costs may be reduced and…
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There are many factors that will influence the decision between cooperation and competition between firms.As rightly stated from the above article, that R&D cooperation across firms have a lot of advantages centre on cost reduction,economies of scale, elimination of useless duplication of efforts… Cost advantages may be achieved by costs sharing. Moreover fixed costs may be reduced and R&D time and budget better controlled. This cooperation can also foster creativity since new research methods and perspectives are brought in. Another advantage relates to timing issues and the undivided attention that the project may receive from the R&D team. These firms may also choose to deliberately install competition to stimulate R&D. With these advantages, the firms will be motivated to cooperate with one another. A good example is the automotive industry.

R&D spillover is also an important factor to consider. The amount of knowledge spillover available to a firm depends on the market structure. As clearly stated in the article, that when spillovers are large R&D cooperation leads to more R&D than R&D competition But when spillovers are small there will be more R&D if companies make R&D competition.

Market structure affect spillover and the incentive to cooperate or compete. A firm in a monopolist market will have no incentive to cooperate with rivals because the spillover will be higher in a patent race than if they share the benefit with a cooperative R&D.

Despite these advantages of cooperation, there also disadvantages. IPR( Intellectual property rights) as a result of the cooperation may be difficult to allocate. Moreover, this cooperation may involve information asymmetries in that one firm can lack the expertise. Either firm may also encounter considerable steering,controlling and confidentiality problem. Also, using a cost transaction framework, Teece (1998) consequently explains the reluctance of firms to rely heavily on external knowledge with uncertainty, cumulative knowledge acquisition and a limited transferability of research outcomes.

To conclude, from the above explanations we see there are some advantages and disadvantages for firms to cooperate and compete in R&D. The final decision will depend on the conditions in which the firms are operating.

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Huili He
To my understanding, the choice between cooperation and competition across firms is conditional, and so called cooperation between firms is no more than a strategy to compete against other potential rivals. R&D spillovers is an important factor, but the degree of R&D spillover is closely related to market structure. I’d like to elaborate my point by comparing different choices under…
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To my understanding, the choice between cooperation and competition across firms is conditional, and so called cooperation between firms is no more than a strategy to compete against other potential rivals. R&D spillovers is an important factor, but the degree of R&D spillover is closely related to market structure. I’d like to elaborate my point by comparing different choices under different market structures.
While some firms choose to cooperate to pool risk, share cost and eliminate duplication, thus to sustain a certain portion of the market or to extend, monopolies are less likely to cooperate. Monopolies occupy the major market, usually, they own adequate capital resource and human resource, they don’t have as much concern on R&D cost or duplication of effort as other companies do, and they can take most of the innovation risks. If there is any risk, monopolies’ innovation risk only comes from potential threat of emerging firms. To prevail in the industry over time, monopolies are more likely to utilize their existing advantages and choose R&D competition instead of cooperation. Even if there is R&D spillover after, monopolies are always capable to take the lead before small firms get the chance to copy their innovations to catch up, or free-ride on monopolies’ effort.
Vise verse, in a perfectly competitive market, none of the firms is so confident to be the winner and takes all, neither do they have the capacity to resist the risk of innovation from other firms, so firms under fully competitive market will probably choose to cooperate on R&D innovation. Besides sharing of cost and risk, eliminating duplication of effort and exploiting economies of scale, R&D spillover is also mutual among firms that have equal resource and equal capacity to innovate. They free-ride on other firms’ effort when other firms innovate one step ahead, and also they are free-ridden by other firms when they happen to be the first one on some innovations. No one can be too far ahead the others and no one will lag behind too far. So they choose R&D cooperation.
When it comes to duopoly, it turns to be like a game theory process. Firms in duopoly don’t want to take the risk of R&D innovation, they don’t have enough capital to afford the cost of innovation either. They consider about cooperating with other firms, but they hesitate because they don’t want to be free-ridden if they put more effort and capital to proceed R&D, since there is R&D spillover. But if they don’t cooperate, they fear of being lagging behind after other firms innovate first. To avoid internecine competition, and also from long strategical point of view, duopoly is more likely to choose R&D cooperation. But it is not absolute cooperation between these firms, cooperation is just a means to the end, and the end is to compete against potential rivals. In other words, firms in duopoly try to counterweigh their competitors by cooperating with their competitors.

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Alexia Guilbert
Many factors have to be taken into account when thinking about investing in R&D. The most important is the profitability. It is often easier not to invest in R&D and wait to enjoy from others firms R&D. This article underlines this issue of spillovers by showing that when spillovers are high it is better to cooperate to have high R&D…
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Many factors have to be taken into account when thinking about investing in R&D. The most important is the profitability. It is often easier not to invest in R&D and wait to enjoy from others firms R&D. This article underlines this issue of spillovers by showing that when spillovers are high it is better to cooperate to have high R&D which benefits the firms and the society whereas low spillovers incitates firms to compete.
Therefore, incentives to innovate have to be found.
One of the main factor affecting the choice between cooperation and Competition in R&D is the legislation regarding intelectual property rights. Indeed, if the legislation is hard on intellectual property rights, promoting patents and copyrights, firms will be more interested in cooperating because won’t be able to benefit from the firms R&D.
But if the legislation takes more into account the antitrusts policies, then, they could punish cooperation in R&D because it could create cartels etc. In this case, competition could be better.
So the main question is what is the most beneficial for the society. The government’s choice to stress antitrust compared to property rights legislations should be according to what’s best for the people when firms mostly thing about their profits.
At first we could thing that competition will be the best because all firms would have to invest in R&D and do their best for the consumers. However cooperation could be better. In fact, when firms do royalty-free cross-licensing agreement as cooperation, they do not share costs but only results, it is benefiting both firls but also society with more R&D.
To conclude, spillovers is only one of the factors to be taken into account in the cooperative or cooperation choice in R&D and governments are important actors.

http://www.brookings.edu/~/media/projects/bpea/1990%20micro/1990_bpeamicro_katz.pdf

http://www.wipo.int/patent-law/en/developments/research.html

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Gabrielle van Outryve
The choice between competition & cooperation in R&D is a choice that highly depends on the view and the purpose of the concerned firms, but also on the context. If the company is very profit-driven, it would rather choose to compete if they work on an innovation that is promising and that is protected by some patents. The firm then…
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The choice between competition & cooperation in R&D is a choice that highly depends on the view and the purpose of the concerned firms, but also on the context. If the company is very profit-driven, it would rather choose to compete if they work on an innovation that is promising and that is protected by some patents. The firm then has to invest more capital, both in terms of money but also human capital. Competition requires having the best skills to overthrow the other firms. Having the right people at the right place is then essential.

On another hand however, some industries need to collaborate to obtain results. A single investment can then benefit all the collaborating firms, which increases the total investments that can be made. Cooperation improves thus the efficiency of the firms. Most of the firms that choose this are firms whose products demand enormous research costs, like the pharmaceutical and medical sector. By working together, they save money but also time. And saving time means for them saving lives. In these cases then, cooperation is a better choice.

Some studies advance the argument that the type of partner and the sector in which the firm belongs are main factors that influence the choice “On the one hand, in industrial firms an increase in the perception of risk reduces the probability of entering into agreements with other companies in the same group, with competitors and with institutions, but does not affect cooperation with suppliers or customers, while the firms in the service sector facing a greater risk prefer not to cooperate with suppliers or customers, and institutions. “

So even if we can acknowledge that spillovers are on top of the list of factors that you have to take into account, we see that R&D spillovers aren’t the only factors in the decision game.

http://www.ub.edu/irea/working_papers/2012/201213.pdf
http://www.brookings.edu/~/media/projects/bpea/1990%20micro/1990_bpeamicro_katz.pdf

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Nicolas Van Keirsbilck
First of all, investing in Research and Development is essential for a firm that wants to evolve in its market and expand itself. Developing new products, new services, be innovative and find a new and better way to use an existing product, … can be done thanks to R&D. But if every firm should invest in R&D, should they do…
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First of all, investing in Research and Development is essential for a firm that wants to evolve in its market and expand itself. Developing new products, new services, be innovative and find a new and better way to use an existing product, … can be done thanks to R&D. But if every firm should invest in R&D, should they do it together or on their own and try to overtake their competitors?

If companies decide to cooperate and invest together in R&D, they will put their knowledge and expertise together, have more ideas, and certainly be more efficient. We could imagine two firms, working in different sectors, using a single R&D center to develop products, technologies or ways to use them for each firm and each activity. That way their investments in R&D would be less important and the companies could improve a lot. Moreover, because they aren’t in the same fields of activity, they could extend their market shares in their own sectors without stepping on each other feet.

Of course if the two firms work in the same sector of activity, it can be more difficult to work together and cooperate in R&D for two separate and competing firms. They could grow and take a bigger position in the market thanks to their innovations and developments, but would still compete with each other.

The article deals also with the fact that R&D spillovers can be a good way to choose between cooperation and competition. Indeed, it helps to make a choice, but there are plenty other factors that can affect this choice.

The first factor companies should consider is the type of market they are into. Obviously, products or services provided by the firms to their customers are the main factors that firms should take into account to choose if they want to cooperate or not in investing in R&D.

Another factor important is the size of the firm. For example, a small firm wants to increase its market share and overtakes its competitors, but often has less money to invest in R&D, so it could be interesting for it to cooperate with another company in order to create a new product and share the cost of the investment.
For the big firms, it can be a good idea to cooperate with a small one and invest in it. Indeed, small and new firms often have a lot of ideas, but not the money to develop them. So with the money of a big company, the small one could enhance a product or a way to use it and the two firms could benefit of this improvement.
But as said in the first part of my comment, it should be preferable if the companies aren’t working in the same fields of activity.

The last factor affecting the choice between cooperation and competition in R&D investment I will talk about is the nature and the term of the project itself. Of course, not every idea can be developed in collaboration. For example, if a firm thinks it has found the idea of the year, it will certainly not tell this idea to another firm but try to develop it on its own and be the only beneficiary of this project.
The term of a project is an important point too. Short and long term projects shouldn’t be treated the same way. Indeed, long terms projects, often more important but also more expensive, can be develop by several firms together, but short term projects are more likely to be treated by a company itself, in competition with other ones.

In conclusion, there are a lot of factors that can affect the choice between cooperation and competition in R&D investment, this choice mostly depending on the conditions in which the firm evolves.

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Charles Brassinne
The question: “is it better to compete or cooperate regarding R&D?” is rather difficult to answer. There is no doubt that companies have some incentives to cooperate in R&D as “it allows them to better manage the process by pooling risks, sharing costs, eliminating useless duplication of efforts, pooling complementarity skills, or exploiting economies of scale” as stated in the…
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The question: “is it better to compete or cooperate regarding R&D?” is rather difficult to answer. There is no doubt that companies have some incentives to cooperate in R&D as “it allows them to better manage the process by pooling risks, sharing costs, eliminating useless duplication of efforts, pooling complementarity skills, or exploiting economies of scale” as stated in the present article. However, as Bernard T. Ferrari and Jessica Goethals explained, there are situations in which rivalry is preferred to spur innovation. These findings highlight the fact that the best choice between cooperating and competing in R&D is dependent on the circumstances in which the firms are interacting.

Before going any further in the analysis of these circumstances, I think it is important to define the scope of the benefits considered as well as the moment in the R&D process where the firms compete or cooperate. Indeed, according to Michael L. Katz and Janusz A. Ordover (1990), the benefits of cooperating or competing can be divided into private and public welfare. Private welfare here refers to the benefits absorbed on the companies’ side whereas public welfare is defined as an increase in terms of consumer surplus or society’s well being. Regarding the moment in the R&D process where the firms compete or cooperate, the authors also mentioned that the cooperation could occur before (ex ante) or after (ex post) the innovation has been developed. In this case, the cooperation ex post would be in the form of the sale of patent rights to another firm.

In order to facilitate the already hard enough question of cooperating versus competing in R&D, I decide to consider only the perspective of companies engaging in such interactions (private welfare) and also that the potential cooperation would be before the final development of the innovation (ex ante). Indeed, my decision is supported by the fact that the present article focuses more on the private welfare and the cooperation ex post assesses the question of transferability of the patents, subject that has already been discussed in a previous article (reference to “Market for technology: do they really work?”).

In this context, I report some circumstances or factors that could influence companies to cooperate or compete in R&D.
(1) A first factor is the degree of R&D spillovers, as developed by Claude d’Aspremont and Alexis Jacquemin (1988). According to their study, the extent to which the R&D performed by one firm can benefit other firms is an important factor that influences cooperation. In that sense, the higher the degree of R&D spillovers, the more cooperation will be preferred to competition.
(2) According to Kamien and Zang (2000), another factor would be the extent to which a firm could absorb external knowledge in their own research. In that regards, their results state that research cooperation is more likely to occur between firms when the research agenda is “general” (as opposed to “specific).
(3) A third factor would be the degree of complementarity between the potential cooperating firms. The higher the complementarity, the more likely the firms will choose cooperation against competition. Indeed, if there is a high complementarity in processes or operations between firms, it is more likely that they will find complementarity in the R&D process that would result in higher incentives to cooperate. However, if the complementarity between the underlying firms comes from the fact that the firms are acting in the same market, the effect should be discussed further.
(4) This last discussion actually highlights a fourth factor influencing cooperation in R&D. This last factor is the competitive relationship between the potential cooperative firms. It is clear that cooperation in R&D would be preferred between players acting in different markets. Indeed, it would allow the cooperative firms to keep the innovation for themselves in their own market and enjoy a competitive advantage against their direct competitors. However, following the same logic, if the cooperation concerns firms that are direct competitors, it less likely to happen.

To conclude, despite the undeniable benefits that cooperative R&D would bring, the answer to the question: “is it better to compete or cooperate regarding R&D” depends on several circumstances or factors. I presented four potential factors that could influence the decision to cooperate or compete in R&D. These factors have been defined under the assumption that the firms would cooperate or compete before the innovation has been developed (ex ante) and by considering only the private welfare. There may be other factors influencing the decision such as the level of competition in the market of the underlying firms. However, I preferred not to address this question because the consequences of higher competition on the cooperation in R&D do not seem to go in one direction.

Sources:
https://www.ipdigit.eu/2010/09/rd-cooperation-or-competition/
http://www.mckinsey.com/insights/innovation/using_rivalry_to_spur_innovation
– KATZ, M., L., ORDOVER, J. ,A. (1990), R&D Cooperation and Competition, retrieved online, http://www.brookings.edu/~/media/projects/bpea/1990%20micro/1990_bpeamicro_katz.pdf
– D’ASPREMONT, C., JACQUEMIN, A. (1988), Cooperative and Noncooperative R&D in Duopoly with Spillovers, retrieved online, http://www.jstor.org/stable/1807173?seq=1#page_scan_tab_contents
– KAMIEN, M., I., ZANG, I. (2000): Meet me halfway: Research Joint Ventures and Absorptive Capacity, International Journal of Industrial Organization, 18, 995-1012.

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Gaetan
« Research and development (R&D) activities comprise creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications. » (Source 1) R&D can be made alone or with others research departments from differents firms to take advantage of…
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« Research and development (R&D) activities comprise creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications. » (Source 1)

R&D can be made alone or with others research departments from differents firms to take advantage of this creative work respectivly alone or together. When they cooperate, firms agree on the level of R&D expenditures (cost sharing), they can engage in the cooperation. Then they can setup joint research facilities (RJV).

Firms are more likely to cooperate when they are larger. It depends on the effectiveness of their strategic protection. If a firm can control the outflow of commercially sensitive information, this firm will be more likely to engage in cooperative agreements. Seeing the globalization of the markets and the fact that the entrance barriers become weaker, firms from the same country have to make R&D cooperation to compete with foreign firms. It is also the case in the national market seeing the fact that the number of producers increases. In incomplete information market, when firms don’t know the cost R&D of each other, they have an added incentive to cooperate and enter into an RJV agreement.

If spillovers reduce total profits, the innovationg firm tends to retain the strategic gain from innovation. The possibility to become the monopolistic firm makes the R&D competition desirable. When spillovers of an R&D competition are offsetting, the R&D competition tends to be preferred to the R&D cooperation. It is the opposite result with the incremental spillovers.

The choice between R&D cooperation and competition depends on the environnment, the market and so on. They are many ways to compete on a market in which competitors becomes more and more efficient and no one of those ways can always be succesful.

Sources :
1. http://www.nsf.gov/statistics/randdef/fedgov.cfm
2. http://www.brookings.edu/~/media/projects/bpea/1990%20micro/1990_bpeamicro_katz.pdf
3. http://www.sciencedirect.com/science/article/pii/S1090944304000584
4. https://mpra.ub.uni-muenchen.de/59259/1/MPRA_paper_59259.pdf
5. http://web.iese.edu/bcassiman/aerversion-final.pdf

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David Vanraes
The strategic choice between cooperation or competition is a at my opinion extremely dependent of the values that the company has and which personal objectives the firm has in mind. Next to the fact that for many economic reasons there are many pro-arguments for competition I want to say something about pro-arguments for cooperation within and across firms. I make…
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The strategic choice between cooperation or competition is a at my opinion extremely dependent of the values that the company has and which personal objectives the firm has in mind. Next to the fact that for many economic reasons there are many pro-arguments for competition I want to say something about pro-arguments for cooperation within and across firms. I make a clear distinction between R&D competition/cooperation between and within firms.

In the perspective of R&D across firms spill overs are not the only reason to do cooperation or not. The paper by Claude d’aspremont says clearly that it is based on a model ignoring many crucial aspects of R&D activities. I think for example to pharmaceutical research to find as soon as possible solutions against bad diseases or epidemics. In these kind of situations it is indispensable that a cooperation exists and particularly between ngo’s. Therefore it is important that there are any obstacles made by profit-driven companies. No competition between firms in order to pool complementary skills, exploiting economies of scale and spread costs in order to find the fast as possible a solution for this disease.

In the perspective of R&D competition within firms, particularly on the level of productive rivalry as modern forms of « Paragone » is to my opinion a very narrow way of thinking. As the paper by bernard, Goethals and Ferrari says (2010) that many companies overlook the ability of productive rivalry to stimulate innovation. The paper of this statement doesn’t tell anything of what the consequences can be on the level of well being of employees of these kinds of companies. Setting employees up against each other to foster creativity and performance by for example setting up two or more teams working on the same project at the same time within a firm is not socially desirable. The worst is that these kind of R&D strategies are maybe strongly contributing to R&D but they don’t take into account the social health of the employees. People might get very stressful or jealous where in the worst cases hate will dominate as an incentive to work. These can consequently lead into a decline of the functioning of a company. The Harvard business review (2005) says that it is extremely important to create colleagues of the employees and not competitors. Secondly, I was thinking if it is acceptable to look back to the Renaissance to find answers for stimulating R&D through competition within the firm? In that time social and human theories were strongly underdeveloped compared with where are now on human and social level. Therefore i prefer a pure cooperative strategy for R&D within the firm instead of creating rivals.

http://www.mckinsey.com/insights/innovation/using_rivalry_to_spur_innovation

https://hbr.org/2005/09/create-colleagues-not-competitors

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Aurélia Job
As economics is part of an ecosystem it is no surprise competition and cooperation do not only involve endogenous aspects. At least three exogenous ones can be counted: the macro-economic level, the micro-economic level, and the pure managerial/theoretical level. Global competition affects the propensity of industries to either compete or collaborate. As such a company located in a neo-emerging economy won't…
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As economics is part of an ecosystem it is no surprise competition and cooperation do not only involve endogenous aspects. At least three exogenous ones can be counted: the macro-economic level, the micro-economic level, and the pure managerial/theoretical level.

Global competition affects the propensity of industries to either compete or collaborate. As such a company located in a neo-emerging economy won’t have the same incentive to collaborate as an industry located in a developed market. To some extent we can consider it an analogy for the maturity of the industry where the company is. In addition, policies relative to industries and markets have externalities which create an incentive for companies to either collaborate or compete (that may also include cartels whenever there is not enough inventive to report collusive behaviours) (1).

On an other level entrepreneurial culture creates a distinctive approach toward strategic views. Indeed, the size and age of the company are as important as those of the industry as a whole. Thus it impacts the managerial culture as well as the attitude toward R&D strategies. Moreover, location is more and more recognized as important as paradigms are evolving from global to local. Business has for a long time been based of ultra competition which is part of the American culture of enhancing everyone’s value by performing better than the others. However, this is not the only way to create value added. Indeed, since the 60’s Scandinavians have promoted a co-operative approach the Swedish strategist Eric Rhenman called “industrial democracy”.(2) Besides, the difference between American and Scandinavian mindsets are logical, as cooperation is based on mutual trust, and we have seen that some cultures are more prone to trust than other as per the results from the Global General Survey (https://pbs.twimg.com/media/BnePfNxIQAE-gZW.jpg).

As such Americans and Scandinavians have diametrically opposed results as the former rank -25% of the overage trust result whereas Norway, Finland and Sweden have a 20.7% score. (3)

Last but not least, the paradigm level must be taken into account when considering incentive to cooperate. As mentioned before, business is taking a more and more local approach rather than global, which is clearly reflected in Porter’s most recent paper(4). Indeed his jingoistic way of seeing business is slightly modified from a profit war to a value-added enhancement for all the stakeholders. To conclude, the cooperative or competitive approach of an industry does not only depend on spillovers but also on the different perspective toward the way of doing business which exponentially increases the strategic view on R&D.

To conclude, the cooperative or competitive approach of an industry does not only depend on spillovers but also on the different perspective toward the way of doing business which exponentially increases the strategic view on R&D.

Source:

(1) https://www.ipdigit.eu/2013/11/is-rd-cooperation-a-steppingstone-to-collusion/

(2) http://www.ft.com/cms/s/2/84bbd770-b34d-11e3-b09d 00144feabdc0.html#axzz3JSbxswEm

(3) Guiso, L., Sapienza, P., & Zingales, L. (n.d.). “Does Culture Affect Economic Outcomes?” Journal of Economic Perspectives.

(4) Porter, M., (2011). “Creating Shared Value”, Harvard Business Review.

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Pranshu Diwan
In order to compare Competition and Cooperation in R&D, we can compare many different perspectives - a behavioral viewpoint, an economic view and a normative view and others. Firstly, from a purely behavioral viewpoint, if we look at how R&D innovations take place in organisation, both cooperation and competition have their own merits in different contexts. Merely pumping more money into…
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In order to compare Competition and Cooperation in R&D, we can compare many different perspectives – a behavioral viewpoint, an economic view and a normative view and others.
Firstly, from a purely behavioral viewpoint, if we look at how R&D innovations take place in organisation, both cooperation and competition have their own merits in different contexts. Merely pumping more money into R&D does not automatically create new and viable sources of innovation unless it provides both the resources as well as creative freedom to the people working on such innovations. In businesses where synergistic effects are strong or there are a lot of different players using the same basic elements or where there are different tiers to any innovation, such resources can free them from the drudgery of ‘reinventing the wheel’, and instead focus on the more challenging innovations pushing new frontiers. For example, in the video game development industry, many game studios now rely on the frostbite engine for its pioneering work on graphics, design and textures to focus on other elements of gameplay. Thus cooperation is better than competition here. The ‘spillover’ in this case is one way, and as a public good, more innovation benefits everyone, with some players focussing on lower tier design elements and others focussing on higher tier gameplay. Similarly, NASA outsources some of the lower tier robotics to other firms while focussing on higher tier research itself.
In other cases, primarily where there is less tiering of innovation – competition works best as it acts as a stronger motivation for the people involved. In Renaissance Italy, much art, scuplture and architecture was developed through ‘masters’ trying to outdo one another. Here it is essential that barriers to entry are low so that the threat of new rivals keeps R&D innovators on their toes. This problem is particularly amplified for incumbents in an otherwise innovation driven oligopoly where fear of new innovative competitors drives firms to either compete or acquire talent to maintain the status quo. If, however, it was possible to cooperate with someone not necessarily encroaching your sphere of expertise – cooperation is still possible. Apple actually relies on Samsung with its superior process innovation for manufacturing of core components, while their rivalry in high end electronics continues to push frontiers.
Another result of the behavioral perspective is the ubiquitious “Peer Effect”. Competition and peers can actually determine the direction of both R&D spending and managerial focus. So if in my highly competitive industry, I believe that Mobile technology and not the Cloud computing is the future, others might follow suit leading to more overall R&D and consequently more innovation in Mobile Technology instead of Cloud technology

Secondly, from an economic standpoint, if we consider the results of R&D as a public good, it is not only spillover effects that determine innovation overall. From a microeconomic & game theory perspective, every firm could look at its cost-benefits of collusion vs competition. Even with high Spillover, an industry might have IP regulations or the ability to charge a premium to customers that make it more economically logical to compete rather than collaborate. Even if the risk adjusted cost of developing a new drug alone is 10X higher than doing so in collaboration, if the drug treats a previously incurable disease & I can out-patent competitors – the windfall could be potentially huge enough to outdo collaboration. This works even better in industries that have lower risk of R&D investment meeting with failure (buy superior talent = success).
Alternatively, the logic of using up stagnant capital in R&D investment for tax purposes is why a lot of Indian firms choose to invest by collaborating with newer companies that may or may not work. This sense is shared by VCs who collaborate with multiple companies with low spillovers in developing an ecosystem that supports the broader portfolio that they are betting in.
From an investor standpoint too,a company might simply collaborate of R&D investment just to show its shareholders that it is “serious” about innovation and maintaining an edge
Finally, from a puely nomative viewpoint – collaboation is considered moe ethical. Since your pupose is to serve your customer’s interests best, you should do so by leaving no stone unturned (including collaborating with potential competitors). This works be.st in the long run rather than short run economic states where sometimes you, and other times your competitor might come up with that groundbreaking innovation. However, collaboration also exposes you to non-compete clauses and chances of price determining collusion which are harmful to customers, and ultimately to the entire industry as consumer confidence is eroded.

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Gonçalo Ciravegna da Fonseca
The choice between cooperation and competition in R&D depends on several factors. This decision doesn’t have a simple answer as it is determined by many aspects regarding the company and its own business. In fact, as the post explores, the degree of R&D spillover is one of the key variables that affects this decision. In addition to that, we can say…
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The choice between cooperation and competition in R&D depends on several factors. This decision doesn’t have a simple answer as it is determined by many aspects regarding the company and its own business.
In fact, as the post explores, the degree of R&D spillover is one of the key variables that affects this decision. In addition to that, we can say that, in contexts characterized by high risk, cooperation emerges as the best solution because firms share their business risks and behave in a more conservative way.
In other hand, the size of the firms within the market can be an aspect that influences this strategic decision. Small companies prefer to cooperate so that they can share costs and develop in a more quick and consistent way. Regarding this issue, big companies behave in a non-cooperative way because they already have the necessary infrastructures and knowledge so they don’t want to divide their information and profit with other firms.
The life cycle of the products is another factor that has repercussions when choosing between cooperation and competition in R&D. Futhermore, when the products have a low life cycle, enterprises behave in a competitive way as they are always developing new outputs. In this scenario, companies don’t want to exchange the knowledge and information because they only have profit in a short period of time as the products are always being replaced. In other hand, when we are dealing with products which have a long life cycle, competition is the most strategic answer as an effort in R&D has a long term profit so companies should consider synergies as an option.
Concluing, companies should take into consideration a lot of aspects when deciding between cooperation and competition in R&D and must act in a strategic way.

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Carolina Rosero
First, it is somewhat misleading to compare the McKinsey Quarterly article by Bernard T. Ferrari and Jessica Goethals to the article by Claude d’Aspremont and Alexis Jacquemin, as the objective of each article differs. The McKinsey article suggests methods by which firms can boost their own capacities for innovation by borrowing from Renaissance practices. The second article discusses whether competition…
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First, it is somewhat misleading to compare the McKinsey Quarterly article by Bernard T. Ferrari and Jessica Goethals to the article by Claude d’Aspremont and Alexis Jacquemin, as the objective of each article differs. The McKinsey article suggests methods by which firms can boost their own capacities for innovation by borrowing from Renaissance practices. The second article discusses whether competition or cooperation between firms will yield the best R&D results, by considering externalities. Whether within their own walls firms emphasize rivalry or cooperation in R&D, has no apparent impact on whether they should collaborate or compete in R&D, with other firms.

Further, when extrapolating from the McKinsey article to a situation of competing firms, the article seems to suggest that a middle ground between competition and cooperation would be the most beneficial. The authors call this middle ground “rivalry” or “paragon”, enabling a “comparison” of artists (or firms). This “comparison” describes what a consumer does when choosing a product, and would seem to suggest that more cooperation is beneficial between firms. On the other hand, however, in the production of art, the artists are less concerned with added costs from repeating each other’s work, and more concerned with their unique internal artistic process. Again, the comparison with the Renaissance would not seem to be applicable to inter-firm rivalry.

Therefore, the McKinsey article does not actually challenge the conclusions of Claude d’Aspremont and Alexis Jacquemin .Overall, when firms benefit from high levels of spillover as a result of cooperation, they are likely to continue to cooperate. When firms benefit from small levels of spillover, they will be more likely to compete. Rather than following the assumption that firms should collaborate during the R&D phase, and compete during the production stage, Claude d’Aspremont and Alexis Jacquemin suggest that the amount of spillover should be the determining factor at both phases. The best lesson taken from comparing the two articles, is to assume that in the Renaissance, the artists benefited greatly from their high degree of collaboration, without losing their individual uniqueness and competitive earning power. Therefore, we could conclude that the McKinsey article provides an example from the Renaissance of a high level of spillover reinforcing collaboration in artistic R&D, and benefiting the artists (or companies).

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Regina Tukhfatullina
Due to the given article and various researches made, the response for the question – what is better for R&D cooperation or competition - is not obvious and depends on many circumstances. One of the most significant is the degree of the R&D spillovers. What are the other factors which could affect the firm’s choice to cooperate or not? To analyze I…
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Due to the given article and various researches made, the response for the question – what is better for R&D cooperation or competition – is not obvious and depends on many circumstances. One of the most significant is the degree of the R&D spillovers.
What are the other factors which could affect the firm’s choice to cooperate or not?
To analyze I will begin with problems and failures which can arise during the process of R&D cooperation.
Firstly, it’s the choice of a partner, whose complementary skills are useful for the firm’s objectives. This process is vital and very complex to implement, hence the R&D alliance can fail because of two firm’s mismatches. In additional the firm itself might not have the capacity and capability to search for a co-operation partner and manage the co-operation or/and there might be no partner available to cooperate with.

Second problem is the free-riding or moral hazard. One firm may have an incentive to reduce its effort (e.g. by providing low-quality personnel or equipment) and enjoy the partners’ R&D effort inside the cooperation. As well as firms who are outside of alliance could use the results (innovation) created by cooperated competitors.

Third problem could be the issue of two firm’s different corporate cultures. Lack of management, missing cooperation, human problems could become a serious problem on the way of creation of innovation.
However to avoid or decrease the possibility of failures one can choose the appropriate to his objectives, capacities and incentives form of R&D cooperation. Firms can cooperate with partners that differ in their location (domestic vs. foreign), size (large vs. small), market relationship (customers, suppliers, competitors) and nature (private vs. public).
Depending on the degree of co-operation that firms want for their R&D alliances: they can choose to form an independent entity (i.e. research joint ventures (RJVs)) in order to coordinate their R&D activity, or they can adopt non-equity forms of cooperation like cross-licensing, patent pools, and research-sharing joint ventures. The technology and industry (high-tech or low tech) also could affect the firm’s decision to form one type of partnership rather than another.

From the optimistic point of view the successful R&D cooperation solves the problems of the nature of R&D investments, such as uncertainty, high costs, wasteful duplication, and makes firms’ product cheaper or better (due to the complementary skills that are not available within the firm) so that the partners’ profits and consumers’ surplus increase. Nevertheless sometimes R&D cooperation could harm the social welfare because of anti-competitive conduct of partners, such as price restrictions, monopoly situation, lower R&D efforts etc.

To sum it up, I think that R&D cooperation has to be promoted because it makes R&D investments more effective from both firms’ and society’s point of view than when firms compete with each other. Moreover different types of cooperation should be available for firms (e.g. cooperation between firms and public research institutions or universities). The governments’ policy should on one hand encourage the formation of R&D partnerships, on the other forbid (and punish) any collusive behavior in the final markets.

References:

1. Birgit Aschhoff, Tobias Schmidt, “Empirical Evidence on the Success of R&D Co-operation – Happy together?” ftp://ftp.zew.de/pub/zew-docs/dp/dp06059.pdf

2. Marco Marinucci, “A primer on R&D cooperation among firms” http://www.bancaditalia.it/pubblicazioni/econo/quest_ecofin_2/QF_130/QEF_130.pdf

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Mayank
The nature of the industry determines the utility of cooperation vis a vis competition. The nature of the industry depends upon various variables including - 1. number of competitors 2. existence of patents 3. primary industry driver (price vs quality etc) 4. location of the target customer segment 1. An industry having several competitors and a fragmented market structure would probably…
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The nature of the industry determines the utility of cooperation vis a vis competition.
The nature of the industry depends upon various variables including – 1. number of competitors 2. existence of patents 3. primary industry driver (price vs quality etc) 4. location of the target customer segment

1. An industry having several competitors and a fragmented market structure would probably benefit more if there is less of competition and more of cooperation. In perfect competitive environments, following microeconomics theories, the actions of one firm has little impact on others. Hence, if all firms come together and co-operate, this would probably lead to saving of valuable resources.
In an oligopolistic environment, competition would make more sense, since the fewer number of players would result in firms having more incentive to innovate and outdo the others.

2. If an industry is heavily influenced by patents, say the pharmaceutical industry, the importance of patents results in competition becoming the more viable option. Since a patent often comes with the benefits of being in a monopolistic environment, most firms would find it advantageous to go in for competition

3. When price becomes the key differentiator, then firms would prefer to engage in competition so as to achieve the lowest possible costs. However, when technology becomes the key variable, firms might find it better to engage in cooperation and work on the lines of technology transfer since essentially, all firms involved are grappling with the unknown .

4. Geography of the consumer segment might also affect the choice of competition versus cooperation. In India, in the automobile segment, Hero and Honda, Maruti and Suzuki entered into alliances to research and manufacture cars. However in the E.U, this is hardly the case. Government regulations can also play a major role.

These roughly , I believe are some of the important factors governing the choice between cooperation and competition.

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Ankit Khandelwal
Competition or cooperation in R&D arises from a cost benefit analysis point of view. With any economic activity, spill over effects are associated. A firm engaging in R&D has to weigh the incentives it gets from the investment it undertakes. Generally firms tend to avoid taking into account the social benefits from their R&D. Hence, a R&D exercise beneficial to…
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Competition or cooperation in R&D arises from a cost benefit analysis point of view. With any economic activity, spill over effects are associated. A firm engaging in R&D has to weigh the incentives it gets from the investment it undertakes. Generally firms tend to avoid taking into account the social benefits from their R&D. Hence, a R&D exercise beneficial to the society as whole might be neglected by the firm if its marginal benefit is lower than the marginal cost. To counter this problem, policymakers come up with certain rules and regulations.

Katz and Ordover in their paper “R&D Cooperation and Competition” have very eloquently described the factors influencing cooperation or competition among players. We need to take into account the private and social benefits accruing due to R&D. If firms become free riders and adopt technology, then the incentives to carry out R&D are diminished. As a result firms might want to cooperate rather than compete. In turn the social benefits are high. If due to R&D, firms having access to complementary resources gain, then it might lead to competition between firms and limited sharing of knowledge. Government policies such as anti-trust can lead to changes in behaviour of firms.

The problem lays ex-ante where firms have to decide if they cooperate or compete for R&D. The collective efforts of firms to innovate would differ from individual rewards. Moreover, R&D agreements might change the efficiency of how R&D is conducted. In the previous stated paper, the authors have looked upon how these factors influence completion or cooperation. If the total surplus increases with cooperation then firms should not compete. The authors also show mathematically that the outcome due to cooperation is superior to one with competition. An agreement that shares R&D knowledge and not costs will lead each firm to lower its investment levels. Monitoring costs sometimes influence the decision of firms to cooperate. Huge investment costs sometimes can influence firms to pool resources to gain desired results. If assets used in R&D are not easily transferable like laboratories and personnel, firms would be willing to cooperate. Ex ante agreements would reduce delicacy efforts and piracy. Finally, where Intellectual Property Rights are weak, firms are more likely to cooperate.

Source: http://www.brookings.edu/~/media/projects/bpea/1990%20micro/1990_bpeamicro_katz.pdf

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Dernicourt Anthony
This point of view seems well logical. Dependeing on the kind of R&D you will perfom (the spillover), the firm best option in R&D will be affected. Do I have to cooperate or not ? This aim only takes into account the spillover aspect of each situation. But other elements could also influence the R&D strategy. First of all, if a…
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This point of view seems well logical. Dependeing on the kind of R&D you will perfom (the spillover), the firm best option in R&D will be affected. Do I have to cooperate or not ? This aim only takes into account the spillover aspect of each situation. But other elements could also influence the R&D strategy.

First of all, if a firm is big, having a lot of different department in different locations, then even if we are in the spillover case in which R&D can be good for a lot of different firms, we can easily imagine that a such big firm will not cooperate because no matter the spillover, it will use the whole R&D inside of the company, in a lot of different intern departments. It can well be usefull for a lot of different actors, but if all actors types are in a big firm, why are you going to share the costs and then share the benefits from your innovation if you can just hold it for you (with a competitive advantage) and amortize costs by our own. So, the size of the firm, and its diversity could be a factor to be taken into account.

Another factor is also the risk of deciding investing in R&D with other fims, first thinking that everybody will enjoy the innovations coming from it but finally discover that the innovation produced can only give competitive advantage to one firm. It’s misjudging the spillover aspect of the R&D project. R&D is a flow that can go in any direction so ou don’t really know where it will lead you, and whiwh results you will finally have. If both fims have the same innovation, innovation that can only be relevant if only one have it (on a duopoly market here for example), the two innovations will annihilate. Both firms will have lost money in R&D for nothing. Only the society will be fine with that. So there is a risk (like always) and you have to take it into account

Third, this paper doesn’t speak especially on the way that you can work together. In order to develop a common R&D, you will have to work with another firm, having a different culture, maybe different incentives that could lead to problems and conflicts in the project. The cooperation requires that firms follow similar ideas. And in reality, it’s not always the case. You will need to be in a similar sector, or having similar incentives, about a similar product or complementary products. So you have to take into account that on the one hand, you avoid some costs and you share the risk, but on the other hand, you take new kinds of risks about the match between the two firms (the way each firm will influence, finance the R&D). You have to know well with which firm you will cooperate.

In conclusion, R&D cooperation could be better for firms than R&D competition but the spillover is not the only parameter to take into account. Size of the firm, stability of the spillover and incentives of the firms are some parameters that, I think, are well also relevant.

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Rui liu
To choose R&D cooperation or competition is a hard question for firms.It may depends on many factors,such as industry sector, size and position of the firm within the market and etc.If under a fast paced technologic progress as well as a low product life cycle,the choice for this industry is better the competitive R&D,such as industries of mobile phones,software…
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To choose R&D cooperation or competition is a hard question for firms.It may depends on many factors,such as industry sector, size and position of the firm within the market and etc.If under a fast paced technologic progress as well as a low product life cycle,the choice for this industry is better the competitive R&D,such as industries of mobile phones,software and so on.While industries with long product life cycles or industries in which R&D is particularly risky and capital intensive favor cooperative R&D.What’s more,when it comes to the size of the firms,the lager companies may prefer a non-cooperative approach to R&D and for small companies,benefits of cooperative R&D may outweigh costs.However,there is no clear boundaries between them in reality.

The impacts from competition to R&D activities are divided into several ways.According to the definition of the ways of R&D competition made by Dasgupta (1986) Dasgupta divided the competition into two kinds—competitive and non-competitive which based on the revenue of innovation structure.The key point to know which kind of competition R&D competition belongs to is to analyze the revenue function of innovation is jumping or continuity.On the competitive aspect,Stewart (1983) examined the impact of the final R&D spillovers on innovation activities.On the non-competitive aspect,Beath(1995) examined the degrees of substitutability among products ,efficiency of R&D activities and impact of market share under market equilibrium on each variable value.The main conclusions from their models are, on the one hand,under the condition of equilibrium, the more the number of firms,the lower the ratio of R&D input to output.On the other hand,under the condition of the substitutable elasticity among products is higher than the efficiency of R&D activities which have reduced the costs,the purpose of enterprises engaged inR&D is to seek for the maximize profits,but the information and knowledge spillover lead the innovation companies can only get partial benefits.The best behavior for firms is to let rival companies to carry out R&D activities as much as possible and wait to get the benefits of this spillover effects,but this kind common behavior will let the firms decrease the mount of investment on R&D activities.In this way,this kind of R&D competition leads adverse effects on R&D activities.Shortly,under the lower degree of spillover ,R&D competition has positive effects on R&D activities;under the higher degree of spillover R&D competition has negative effects on R&D activities.

The study of R&D cooperation made by d’Aspremont and Jacqucemin(1988) and Kamien(1992)had laid a theoretical framework. d’Aspremont and Jacqucemin, in a two stage duopoly market of homogeneous products,investigated the output stage and R&D investment stage of firms in three differents strategic ways:first,firms carry out Cournot competition independently in R&D investment stage and output stage;second,firms go to cooperate in the R&D stage,but later go to Cournot competition in the output stage;third,the cooperation go through the whole process.The conclusion here is when the spillover argument is more than 0.5(critical value level),R&D cooperation will lead more output and higher level of investment than competition.When spillover argument is lower than 0.5, it will lead an opposite results.Besides,from Kamien’s studies, he concluded if the spillover is in a high level,higher spending level will led byR&D cooperation than competition.The empirical studies showed the similar results the previous theoretical ones as well.

To sum up,under the higher degree of spillover ,R&D cooperation has positive effects on R&D activities;under the lower degree of spillover R&D cooperation has negative effects on R&D activities. However both of the R&D competition and cooperation cannot completely eliminate the innovation under the failures of the market system,but they are suboptimal solutions to solve this failure.

References:
http://www.xzbu.com/2/view-448253.htm
http://www.di.ens.fr/~aspremon/Claude/PDFs/dAsp88a.pdf

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Laurence Busseniers
There are others factors than spillovers that can affect the choice between cooperation and competition in R&D even if it is a major factor of decision. Moreover, there are no an unconditionnal answer to the question whether a firm should compete or cooperate with others on R&D matters. On the first hand, competition is usefull to avoid monopoly and thus…
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There are others factors than spillovers that can affect the choice between cooperation and competition in R&D even if it is a major factor of decision. Moreover, there are no an unconditionnal answer to the question whether a firm should compete or cooperate with others on R&D matters.
On the first hand, competition is usefull to avoid monopoly and thus to increase the innovative behaviour to be more interesting for consumer than the competion. Thanks to competition the consumer surplus is better because the firms have less power.
On the other hand thanks to cooperation there a plenty cost savings and better allocation of the expenditures in R&D. Therefore firm avoid to spend a certan amoun of money in R&D and so the price must be lower. But another view of this problem is that firm if they work hand by hand may not find it profitable to spend money in R&D. If no firm innovate, they save money but the consumer feel not better.
To conclude other influence factors is the duration of an innovative project and because of that the sequential dimension of an innovation or the pure novelty can make vary the amount of cost invested and the duration of it.

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Florent Dauvister
R&D spillovers are one of the factors that can prevent firms from actually increasing their R&D budget, that is because most industries and markets are now relying heavily on keeping their technology secret. Most firms are trying to find a fine line between investing the right amount of money to invest in R&D in order to keep their companies sustainable…
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R&D spillovers are one of the factors that can prevent firms from actually increasing their R&D budget, that is because most industries and markets are now relying heavily on keeping their technology secret.

Most firms are trying to find a fine line between investing the right amount of money to invest in R&D in order to keep their companies sustainable on the long run and making sure that R&D spillovers are kept to a minimal. Obviously, the latter is extremely hard to control as it doesn’t only rely on the company’s shoulders to make sure that their technology stays secret.

In the last 50 years, firms have had to face tougher competition in a more globalised market than ever. R&D cooperation is a way to avoid taking too much risks and make sure that the company can enjoy the advantage of joint R&D cooperation without free-riding. While spillovers are still happening the weight and impact of the spillovers rely on several companies’ shoulders which makes it less of a financial and technological risks for the participating firms.

R&D cooperation is the safest option for companies who want to keep their technological edges and to look further into the future. It is the best of both worlds, it helps firms reduce their personal investment in R&D while still having an overall budget that is much higher than it would have been were they alone to invest in that department. They can all benefit from the minds behind each others’ R&D departments.

All in all, R&D spillovers are too much of a risk for firms to keep on competition without actually looking into a R&D cooperation option.

Source: http://www.oecd.org/sti/inno/2093436.pdf
Note: Paper prepared for the workshop of the OECD-NIS Focus Group on Innovative Firms and Networks,Rome, 15-16 May 2000

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Virág Dezső
Innovations that came out of the company could be more valuable in some cases than those created inside the company. In some way it could be less risky, less expensive and it needs less effort as well. The only question is still the ideal scale of cooperation in R&D. Performance between various R&D cooperation scenarios ranging from full cooperation, as…
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Innovations that came out of the company could be more valuable in some cases than those created inside the company. In some way it could be less risky, less expensive and it needs less effort as well. The only question is still the ideal scale of cooperation in R&D.

Performance between various R&D cooperation scenarios ranging from full cooperation, as in a cartelized research joint venture (RJV) to pure strategic R&D competition (Katz, 1986). The cartelized research joint venture is the situation where firms run one joint R&D laboratory at equal cost to each and fully share R&D results. According to my perspective and my previous studies in the field of applied economics I can say that R&D cooperation, especially cartelized RJVs yield the best performance among all the scenarios regarding to R&D propensity, consumer surplus and producer surplus as well, because under R&D competition the firms’ reaction functions may get into a ,,harmful” way.

The propensity of companies to depart from purely cooperative behavior in a particular alliance is related to the portfolio of market in which each participating firm is present, and to the degree to which these portfolios overlap. The bigger the degree of overlap that means equally the competition in the market the higher the propensity of companies to take part in a common R&D programme. The motivation to do this is billingual: two qualitatively different kinds of benefits are available for both companies: private and common benefits. Altough most companies realize benefits that are combinations of these two kinds. Private benefits are those that a firm can earn unilaterally by picking up skills from its partner and applying them to its own operations in areas unrelated to the alliance activities. Common benefits are those that accrue to each partner in an alliance from the collective application of the learning that both firms go through as a consequence of being part of the alliance. (R Amir, J Wooders, Journal of Economics, 1998)

As a conclusion I am absolutely agree with cooperation in research and develpoment, even though I think it is more efficient to cooperate with somebody who does not operate on the same market. In that case the opportunities are more and it gives open-mindedness.

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Laurie Cavillot
Indeed, there is always this question of competing or collaborating. As a student, I discovered its complexity through the Game Theory. Here, we discussed the benefit of rivalry and the environment influence on the choice. Bruno Cassiman and Reinhilde Veugelers* discussed this question through another factor. This other factor that could determine which of the two strategies to choose is the…
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Indeed, there is always this question of competing or collaborating. As a student, I discovered its complexity through the Game Theory. Here, we discussed the benefit of rivalry and the environment influence on the choice.
Bruno Cassiman and Reinhilde Veugelers* discussed this question through another factor. This other factor that could determine which of the two strategies to choose is the protection ability. By this I mean that even with large spillovers, if the company is able to protect it (as seen in class, there are different ways to do so), then the company can compete in R&D and still keep the full advantage of their research.
So the power that a firm has toward IP is also important in the processus of decision making.
Furthermore, these IP can also be a reason to collaborate. For example, let’s consider a small firm with no mean to protect their foundings, collaboration can bring them these means of protection.

To keep going on the question collaboration vs competition, I would add that it can also be seen as a strategic opportunity: temporary collaborations can give birth to merges, buyouts or partnerships or can also be a “spy” opportunity. Competition can lead to isolating you even more from the rest of the market or support your dominant position.
So the choice has also to be considered through the strategic point of view. Then, the corporate strategy can help in making the decision.

There are sure many other factors influencing the decision but I felt like these two ones were particularly interesting. I guess that being on the field will bring us a bigger overview on the challenges it takes and we’ll be there soon!

* R&D COOPERATION AND SPILLOVERS: SOME EMPIRICAL EVIDENCE FROM BELGIUM, Bruno Cassiman and Reinhilde Veugelers, July 2001

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Nicolas Bindels
As usually, it seems there is no right answer to the question of cooperate or not in terms of R&D. In their paper, Ferrari & Goethals advocate that rivality in R&D tends to spur innovation. While d’Aspremont & Jacquemin develop a reflexion based on a Nash equilibrium which discuss the behaviour of a firm according to the spillovers’ size. As…
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As usually, it seems there is no right answer to the question of cooperate or not in terms of R&D. In their paper, Ferrari & Goethals advocate that rivality in R&D tends to spur innovation. While d’Aspremont & Jacquemin develop a reflexion based on a Nash equilibrium which discuss the behaviour of a firm according to the spillovers’ size. As presented before, following different theories, some factors could influence the choice to cooperate or not in terms of R&D and following my opinion, an interesting one could be the state of the economic environment.

As we could notified during the past economic crisis, the more the economy is slowing down, the more the competitiveness between companies in the same sector is increasing which is obvious and so lead companies into competitiveness instead of cooperation. The same as for the R&D budget, the more the uncertainty about the stability of the economy is, the thiner these budget are. And so as these budget are smaller because of smaller profit, it could lead companies to cooperate in order to reduce their costs. So what could be interesting is to make the balance between these two effects depending on the same factor which is a slowing down of the economy.

An other track to follow in order to study the factor leading to cooperation or competitiveness could also be the level of complementarity between two cooperative firms. Indeed if two firms are highly complementary, their R&D could also be complementary so the R&D result for one could benefit for the other and vice versa, so if their are not competitor but complementary it could lead to increase the cooperation for R&D between both. An other factor that could push it in the other way is the easiness to inter into the market of the other company. Indeed it could scare some companies to collaborate and share R&D each others.
It is not at all proven that these three factors will influence the choice or not and in the right way as imagine in that reflexion nevertheless it seems interesting to investigate on them.

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Debuisson Nicolas
There are of course many factors that influence the choice between cooperation and competition. It would be impossible to tell all. I will quote some factors that I think are important. The first factor is the cost of research and development. If the cost of research and development is high, companies should cooperate to share the costs. Sometimes research costs…
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There are of course many factors that influence the choice between cooperation and competition. It would be impossible to tell all. I will quote some factors that I think are important. The first factor is the cost of research and development. If the cost of research and development is high, companies should cooperate to share the costs. Sometimes research costs and development in some areas may be so high that a company can not do it alone. The company is therefore obliged to cooperate with another company. This kind of cooperation is present in the automotive industry since the development of new technologies or products is extremely expensive.

Another factor to consider is the complementarity between companies. Every business is often specialized in a particular area. If two companies are complementary with each other, they have an incentive to cooperate. This cooperation will provide added value for each company and not just a risk sharing. For example, in the automotive industry, if a company specializing in engines and the other in design, they have an incentive to cooperate to create a new product. Each company receives profits of cooperation with each other.

Another factor is the market structure. If firms are only 2 on the market, they have no interest in cooperating. Indeed, if they cooperate, they lose a potential competitive advantage relative to the business competitor. Firms have an interest in a competition to beat the rival firm and be monopoly.

A final factor that comes to mind is uncertainty. Research and development costs are often enormous. if uncertainty is high on the success of research and development, more companies should cooperate to share risks.

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Cedric Couvreur
As we can see from the text, there are some advantages and disadvantages for both R&D cooperation and R&D competition. I think that when you cooperate for research and development, you are in contact with the products, information, employees, knowledge… from the company you work with. Moreover, there are good relations between both companies in order to make such collaboration…
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As we can see from the text, there are some advantages and disadvantages for both R&D cooperation and R&D competition. I think that when you cooperate for research and development, you are in contact with the products, information, employees, knowledge… from the company you work with. Moreover, there are good relations between both companies in order to make such collaboration happen. Thus, working together will lead to sharing sensible information that could benefit the companies and be just on the edge of what is legal. As said in the text, there are some restrictions and both companies cannot, in any way talk about price or other market-related data. I guess that if both companies would set the same price or collude on obvious things, it will be noticed. But, the temptation is big to collaborate and try to influence other parties in order to get a win-win situation.

Looking at the previous paragraph, you could say it is better to have competitive R&D. By doing this, companies will try to outperform each other and invest a lot of money to come up with new innovations. A disadvantage for companies and society could be that a lot of resources get wasted if companies invest huge amounts of money in the same things. For that matter, cooperating for R&D would be beneficial for the companies. But, when we look at the gain for society, I am not convinced cooperating for R&D is better. Because, if companies collaborate, they might be afraid of divulging too much information to the other partnering company. They could be a bit reluctant to come up with innovative ideas and share all the discovered knowledge. Additionally, companies working together could maybe rest on their laurels because they think they are stronger together and eliminate potential competition. As such, they might invest less to innovate and this would be bad for the consumers as a whole.

On the other hand, Claude d’Aspremont and Alexis Jacquemin talk about R&D spillovers. They state that companies doing a lot of competitive R&D might divulgate information to third-parties for free, whereas they invested a lot in it. This would again be a motivator to bundle research efforts. But, if research from one company could be spread among third-parties, what would hinder information assembled from cooperative R&D from spreading too?

I thus think that R&D cooperation could be interesting if companies work together with a company that is not a direct or indirect competitor. There should also be a good trust-relation in order to foster innovation and provide the best framework for research and development. Bundling forces can also mean having different views on a problem (and from several industries), what can only be beneficial when trying to find innovations.

As a matter of conclusion, I would say R&D cooperation is beneficial for most companies if it is well-defined and there is a good trust-structure. On the other hand, I think society has more to gain with R&D competition because this will ultimately oppose one company against another. All companies will try to find innovations and as such consumers will have more choice.

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Alexandre Germys
It is clear that the circumstances in which companies evolve are determining if they have benefits or not to pool their R&D processes to innovate. In a market where the differentiation is crucial to gain market share, each firm wants to find the innovation on its own before the other firm. So it is more profitable for firms to make…
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It is clear that the circumstances in which companies evolve are determining if they have benefits or not to pool their R&D processes to innovate. In a market where the differentiation is crucial to gain market share, each firm wants to find the innovation on its own before the other firm. So it is more profitable for firms to make R&D competition than cooperation, especially when the innovation is hard to imitate so the firm is sure to keep it. We can say that in this situation the spillovers of the R&D are low because the results of the R&D of one firm are keeping secret and so don’t help the other firms which confirms the conclusion of Claude d’Aspremont and Alexis Jacquemin.

In a situation where the whole market would benefit from a new innovation. Firms have more incentive to cooperate in R&D. As said in the article, they will be more efficient, face less risks and costs to create a collective innovation. We are here in the situation where the spillovers of the R&D are big. If the innovation is easy to imitate, firms will prefer to share the costs of R&D by fear assuming all the costs of development and to see their innovation stolen by the other firms. At the opposite, if an innovation needs the knowledge of many firms to be created, firms will rather decide to collaborate by obligation even if each firm would have rather been glad to create it on its own.

Collaboration in R&D can also result from a marketing strategy. If two firms decide to launch a product together, for example to reach a bigger market. It seems legit to share the costs of development and to share the profits. So the collaboration in certain cases can be a consequence of a bigger strategy.

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Karla Rivera
Initially business cooperation, we can define as those agreements between companies to share resources, skills or activities with the aim of mutual learning and improving competitive position. The scientific and technological cooperation includes a set of activities at any level, individual, institutional or national, and through multiple modalities, involve association and collaboration to achieve common goals and mutual benefit in…
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Initially business cooperation, we can define as those agreements between companies to share resources, skills or activities with the aim of mutual learning and improving competitive position. The scientific and technological cooperation includes a set of activities at any level, individual, institutional or national, and through multiple modalities, involve association and collaboration to achieve common goals and mutual benefit in the field of scientific research and technology. This conceptualization of cooperation emphasizes its instrumental character to the extent that lets join forces, capabilities and funding to achieve goals and outcomes that would not be possible or would be in a larger space of time individually. One of the characteristics that define the evolution of modes of production in the last fifty years is the evolution of the way of doing research and promoting innovation.

Increased cooperation is also explained by the benefits to participants. The recognition of the synergies offered interaction and complementarity, the assessment of increasing the efficiency of the research process, translated into increased productivity, visibility and improving the quality of the process and the results, improvements in the competitive capacities of firms and the impact on the degree of internationalization. However, cooperation, as social and interactive process, has dilemmas and difficulties that arise from conflicts resulting from self-interest of the participants, the complexity of personal and institutional interactions and mainly the opportunity to see the companies to have benefits additional.

For this reason, it is important to note that the promotion of a culture of cooperation requires explicit policies. Most policies have not been aimed at encouraging cooperation, but have been directed more to promote competitiveness. Corporate competitiveness can have many benefits for end consumers, but also creates inefficiencies of all companies working in the same development, it would be best to try to make cooperation to promote innovation but that never this cooperation becomes situations collusion.

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Brice vander Borght
I think that the market and the firm, with whom we share the R&D, are 2 factors that can lead a company to share or not the R&D. I will try to see in which of its 2 cases, what push or not a company to try to do some R&D in common which other companies. Firstly, the type of market…
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I think that the market and the firm, with whom we share the R&D, are 2 factors that can lead a company to share or not the R&D. I will try to see in which of its 2 cases, what push or not a company to try to do some R&D in common which other companies.
Firstly, the type of market is very important. A company which is in a market were newness is important, R&D have to be confidential. A company which has a competitive advantage is in a better situation to survive and avoid bankruptcy in the competitive market. But competition of R&D in this kind of market will become along the time cooperative R&D unintentionally. Competitor will see the new innovation and will take it to do it better. The first company will “give” to competitors the new product without sharing the cost. That situation will push companies to have pattern (which take a lot of time in some countries) and innovation will take more time to be on the market. A market such as new technologies, firms have to be in the situation of R&D competition and put a lot of money in this part of the company.
Secondly, sharing R&D with a competitor is really a bad idea but sharing R&D with a firm which is not in the same sector can be interesting. In this situation, time and money can be saving by this partnership. Of course, there must have a relationship of trust between partners (by contract or something like that) to survive long-term. A partnership between a university and a company, for example, is good for both because that decrease the risk of huge losses and sometime a potential bankruptcy. This kind of relation will also have no problem with the antitrust authorities which will not like to allow 2 competitors to share some R&D.

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Aditya Chandrasekar
Reading through the article clearly showed that spillovers are one of the key considerations in determining the choice between R&D cooperation and competition. As explained in the paper by Clause d’Aspremont and Alexis Jacquemin, when there is a high degree of spillover, i.e private appropriability of the benefits of innovation is not entirely possible, R&D cooperation may be a better…
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Reading through the article clearly showed that spillovers are one of the key considerations in determining the choice between R&D cooperation and competition. As explained in the paper by Clause d’Aspremont and Alexis Jacquemin, when there is a high degree of spillover, i.e private appropriability of the benefits of innovation is not entirely possible, R&D cooperation may be a better choice than R&D competition, and vice versa.

Based on my further reading of the article by Ferrari and Goethals, it appears that rivalry would be an extremely important way to encourage and spur innovation. However, it is clearly brought out in the article that it would work only when there is no ‘winner-takes-all’ policy. For example, as illustrated in the article, the Renaissance artists would compete with each other, but both would be heralded for their unique take on the project. This would spur innovation to a great extent. On the other hand, as we have already understood from earlier readings in the case of patent races etc, there would be a loss to the society if the only the winner, or the one that innovates first is given the reward. Thus this concept, described in the article using the term ‘paragone’, would be another key factor to decide between cooperation and competition.

One important factor that may work against the use of R&D cooperation may be the difficulty in agreeing and entering into cooperation agreements. Since R&D, especially in complex industries such as pharmaceutical industry etc., may go on for a long period of time, it may be extremely difficult for the firms interested in cooperation to contract on future actions. Also, the contribution of each firm in the overall process of innovation may not readily be observable, thus increasing the level of difficulty in drafting and enforcing a long term R&D cooperation contract.

Firms seeking R&D cooperation must also consider the regulatory aspects applicable. Though regulators in charge of competition policies have recently begun to encourage R&D cooperation, so long as it does not make the industry non-competitive, it may still be difficult for the firms to demonstrate the same. Also the regulators’ outlook and policies may also constantly change, thus making it difficult to predict the environment even for the near future.

Thus, these are some of the factors, other than the spillover factor, that need to be considered while making the choice between R&D cooperation and R&D competition.

Sources:
1. R&D cooperation and product market competition – Luıs M.B. Cabral
2. Using rivalry to spur innovation – Bernard T. Ferrari and Jessica Goethals
3. R&D Cooperation and Competition – Michael L. Katz and Janusz A.Ordover

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Achille Klein
All firms have to invest in research and development if they want to experience a future growth. Indeed, it allows to develop new products or services or, even more, to improve existing products of services. But the actual debate is to choice between research and development cooperation or competition. There are many aspects that can push firms to choice the…
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All firms have to invest in research and development if they want to experience a future growth. Indeed, it allows to develop new products or services or, even more, to improve existing products of services. But the actual debate is to choice between research and development cooperation or competition.

There are many aspects that can push firms to choice the cooperation.
First, if two firms (which are not especially in the same activity sector) are agree to cooperate, their knowledge about new technologies will increase at a lower cost than if they decide to compete. Moreover, they could also imagine working together at the same place and both use engines and technologies they bought before but each in the way to achieve their goals. It will increase the exchange of knowledge and experience between employees, the social welfare in these two firms and decrease the amount of money they spend each other in R&D.
But if these two firms are in the same activity sector, the R&D cooperation could decrease competition between these one and also their motivation to find new technologies because all discoveries will benefit to each other.

What about the degree of R&D spillovers which is developed in the article as a key variable in this debate; I think it’s a good way to know if it’s preferable to cooperate or to compete but it’s obvious that it’s not the only way.

Indeed, many other factors can affect this choice in research and development.
For example, the choice can depend on the term of the R&D projects: in the case of a short term R&D project, it would be better to compete with other firms; if we speak about a long term R&D project, it will be more efficient to cooperate with other and have the point of view of everyone to be more constructive.
Another factor could be the size of the company; indeed, smaller companies have minder money to spend in R&D but they have to distinguish themselves from other to grow their market share. So, it could be interesting to cooperate to benefit of other’s knowledge and save money but it would be still preferable to develop exclusive knowledge and compete with other.
This second example of factors which can affect the choice of cooperating or competing leads us to the last I would like to quote: the type of market which is probably the most important factor. All companies must manage their choice in function of the product or service they offer to consumers.

To conclude, there are a lot of incentives to choice R&D cooperation or competition but each choice must be done in function of the circumstances.

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Chen Jia-Zhun
I think that R&D cooperation or competition are different but are both important. On one hand, firms can cooperate in order spend less money in the R&D costs. Indeed, the two or more firms could use their different skills and knowledge together so that they use less time and are more productive. Thanks to that, they could be complementary if they…
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I think that R&D cooperation or competition are different but are both important.
On one hand, firms can cooperate in order spend less money in the R&D costs. Indeed, the two or more firms could use their different skills and knowledge together so that they use less time and are more productive. Thanks to that, they could be complementary if they need the skills of the other firms in order to innovate. As they work together, the other firm will also have benefits through the skills or money that they could earn. It is in fact cheaper than just hiring a scientific team. Firms have so interests to cooperate. The R&D cooperation may avoid the competition between the firms involved in the agreement, but that doesn’t mean that there is no competition between other firms.
On the other hand, I think that if a duopoly remains on the market and decide to operate R&D cooperation, firms will act as a monopoly. This is bad for the consumers as they can increase their prices as they wish. However, competition between firms could be great as they want to be the first to innovate. There is a kind of run and so they are very motivated. Indeed, we can say that a level of competition is necessary in order to influence and develop new innovative ideas.
In conclusion, cooperation has a lot of benefits in order to enhance innovation. However, It is not always the best strategy either as it could be disadvantageous for the consumer. But competition too. Plus, Cooperation may then handicap the innovating capabilities of the firms. When each firm work on its own, it tries to outrun its competitor. And it is then where we could see their real skills. So I think that it is of course different, but it has to be complementary and not abusive.

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leonce mpawineza
R&D cooperation has more advantages than disadvantages .To begin with, R&D entails challenges of high costs ( capital intensive) which make some firms survive without carrying it. This challenge can be solved by firms cooperating and sharing the costs that will be incurred thus making it affordable. Cooperation can lead to sharing of information and experiences which leads to a fast…
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R&D cooperation has more advantages than disadvantages .To begin with, R&D entails challenges of high costs ( capital intensive) which make some firms survive without carrying it. This challenge can be solved by firms cooperating and sharing the costs that will be incurred thus making it affordable.
Cooperation can lead to sharing of information and experiences which leads to a fast quality innovations and reduction in the waste of resources ( duplication of effort) .Risks are also shared in this process of R&D. Spillovers are also minimized since the competing firms are involved in the research.

The major negative aspects which needs to be watched-out by antitrust authorities( ensure that cooperation is only limited to cooperation) is formation of cartels by this firms conducting joint R&D.Which leads to a relaxed competition.
Also among firms there might be conflicts on ownership of inventions and distributions of revenues from the invention.
since the advantages outweighs the disadvantages. R&D Cooperation should be incouraged as they bring in new innovation that benefits the market. Although the cooperation should be under supervision to prevent it from being abused.

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Camille Willot
At first glance, it is rational to consider that R&D cooperation leads to reduction in R&D expenditures. Indeed, the two types of cooperation agreement highlighted by d’Aspremont and Jacquemin in their paper “Cooperative and noncooperative R&D in duopoly with spillovers”, lead, from a first impression, to a reduction in R&D expenditures, because of less wasteful duplication and a reduction of…
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At first glance, it is rational to consider that R&D cooperation leads to reduction in R&D expenditures. Indeed, the two types of cooperation agreement highlighted by d’Aspremont and Jacquemin in their paper “Cooperative and noncooperative R&D in duopoly with spillovers”, lead, from a first impression, to a reduction in R&D expenditures, because of less wasteful duplication and a reduction of the total production. However, this paper outlines the fact that an important factor in this issue are the externalities and spillovers in R&D.

I found the paper by Ferrari and Goethals highly interesting. Indeed, it developed another way to see things; look at paragone, a certain concept of rivalry. Instead of making a Manichean difference between competition and cooperation, this concept is more a comparison where “two rivals are compared and celebrated for their relative achievements”. By using this concept I am going to highlight two key factors that, in my opinion, are affecting the choice of R&D cooperation or competition.

The first factor is to me the importance of having the right attitude in rivalry, the “paragone attitude”.

This is enabled if, firstly, there is a positive attitude towards different expertise and knowledge. Indeed, collision between many different experts leads to a greater range of knowledge and a deeper analysis.

Second, the attitude towards different results and ideas is also really important. If companies are able to appreciate different point of views, learn from them and try to improve their innovation processes, cooperation is a rewarding idea. Companies should therefore not have too closed mindsets about what they are looking for, and be open for other ways to answer the problem.

Third, I think that a shared vision is really important in order to create cooperation. If there is no shared vision about the “paragone attitude”, some companies will want to go further in their research by sharing their knowledge, but others will not want to share, and will then just free-ride on others’ ideas, which is not fair.

To sum up this first argument, in my opinion, a right and adequate attitude must be found: towards collision and towards different results and ideas. Companies should not have too closed mindsets and if this vision is shared by everyone, then will R&D cooperation lead to more R&D than competition.

The second factor affecting the choice between cooperation and competition is the reward given to innovators. There shouldn’t be a “winner takes all” reward (inducement prize, patent…), because otherwise, there is no incentive to collaborate. This is also related to the concept of paragone: everyone’s work should be highly appreciated, and comparing works shouldn’t diminish one at the expense on the others. If there is a reward only for the winner, the company will obviously prefer to go for R&D competition.

As a conclusion, two key factors that are affecting the choice between R&D cooperation and competition are the attitude towards paragone (differences in expertise and results, and the importance of a vision shared by each innovators), and the reward given to them.

SOURCES:

d’Aspremont, B. and Jacquemin A. (1988) Cooperative and noncooperative R&D in duopoly with spillovers. American Economic Review, 78(5), 1133-1137.

Ferrari B. & Goethals J. Using rivalry to spur innovation. Online http://www.mckinsey.com/insights/innovation/using_rivalry_to_spur_innovation, consulted on the 17th October 2014.

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Ana Martínez Alcaraz
In the economic terrain there is not an unique correct solution for one question. The same happens in the R&D cooperation (or competition) issue. There is a big amount of characteristics that can make change the behavior of an enterprise, also in this case: As we know, innovation have costs and the smaller is an enterprise, the more difficult is to get…
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In the economic terrain there is not an unique correct solution for one question. The same happens in the R&D cooperation (or competition) issue.

There is a big amount of characteristics that can make change the behavior of an enterprise, also in this case:

As we know, innovation have costs and the smaller is an enterprise, the more difficult is to get the necessary funds to innovate. With the R&D cooperation, the small companies can split their costs and risks joining forces and innovate. Following this idea, a business bigger do not need to cooperate for money reasons because is easier to get financing. So the size of the firm is something to keep in mind.

The market structure is something important too. The firms which enjoy of an monopolistic position have lower incentives to cooperate and share the costs of the innovation. Meanwhile, in a competitive market, some firms would be more willing to cooperate and innovate together, building an profitable oligopoly and excluding the other competitors.

Regarding spurring innovation I think that competition spurs innovation as a way to get a monopoly position (or maintain this position) but cooperation allow small firms with low capacity to invest in innovation reduce the individual costs.

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Luyanqi Zou
With technology change accelerated, product life cycles shortened and new technology research and development complicated, an ordinary firm is difficult to achieve the goal of all innovation by their own resources. Technology spillover effect is a kind of objective existence, more and more scholars begin to concern about whether R&D cooperation can make full use of technology spillover effect with firms…
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With technology change accelerated, product life cycles shortened and new technology research and development complicated, an ordinary firm is difficult to achieve the goal of all innovation by their own resources.

Technology spillover effect is a kind of objective existence, more and more scholars begin to concern about whether R&D cooperation can make full use of technology spillover effect with firms involved into R&D cooperation. C.d’ Aspremont and A. Jacquemin(1988) establishes a basic framework for the problem of cooperate R&D. They examined three different strategic way in the output stage and R&D investment stage in an oligopoly market of a two stages of homogeneous products, they presented that firms’ cooperating in all stages could bring more output and R&D input than firms’ cooperating only in the stage of R&D investment. Based on the Aspremont’s research, Kamien(1992) compared the level of R&D investment in “R&D cartelization ”, “RJV competition”, ”RIV cartelization”, he found that the level of effective R&D input was higher in ”RIV cartelization” than in “R&D cartelization ” and “RJV competition”. K. Suzumura(1992) examined the positive and normative effects of cooperative R&D-whereby member firms commit themselves to the joint profit-maximizing level of R&D in a “pre-competitive stage” but remain fierce competitors in the product market. He analyzed the effect of cooperate R&D on social welfare by introducing second-best welfare function and found that cooperate R&D had a positive effect on social welfare. Cassiman and Veugeler (2002) divided spillover effect into two kinds: the incoming effect and the outgoing effect. They analyzed the relationship between firm-specific spillover and cooperation by data of Belgium manufacturing industries and concluded that incoming knowledge could promote R&D cooperation.Throughout these researches, scholars have discussed the problem of cooperate R&D investment considering technology spillover widely.

In order to gain scale economy effect, obtain complementary resources, avoid repetitive R&D input and overcome R&D costs obstacles. ,many firms choose R&D cooperation. Based on the relationship of the participants in the industry of the value chain, cooperate R&D can be divided into four types: cooperation with competitors, cooperation with suppliers or distributors, cooperation with competitors and suppliers and no cooperation. When R&D interest parties implement R&D investment, other interest parties can achieve earnings through free use of technical knowledge, and they don’t need to pay for it, this is the effect of technology spillovers, this kind of technology spillover that exists widely can act on R&D decision of firms. In general, When firm chooses no cooperation or vertical cooperation, horizontal spillovers have an ambiguous effect on R&D investments.Vertical cooperation can maximize firms’ R&D investments; When horizontal and vertical spillovers are relatively high,cooperation is the best choice.

All in all, companies should act strategically when they invest on R&D. There are many factors to decide which should be case-by-case analyzed.

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Hélène Linsmeau
The choice for a company to collaborate or not in R&D is a complex and influent decision. Indeed, this can lead to a faster improvement on a product or a process and make your company a leader on the market. On the opposite, it can be more useful for your partner and lead them at the top on your market. As…
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The choice for a company to collaborate or not in R&D is a complex and influent decision. Indeed, this can lead to a faster improvement on a product or a process and make your company a leader on the market. On the opposite, it can be more useful for your partner and lead them at the top on your market.
As it’s explained in the article, the level of spillovers are a key point on which makes debate on the way to behave in function of them.

There are also different kinds of spillover that might take into account. Indeed, when the spillovers are offsetting incremental R&D collaboration is preferred. The reason of this fact is that the firms have more power and are “stronger” to face the growing market. On the contrary, completion in R&D is the choice made by firms which face offsetting spillover.

But there is other criteria on which the perfect decision doesn’t exist.
For example; on one hand, the technology dispersion is great factor to collaborate because companies will have an easier and faster access to new knowledge and it will reduce the first fixed cost needed for researches. Indeed, the collaborating’s company already made the first steps in the research and the acquisition of furniture to resolve them. Some studies show that when two technologically divergent companies collaborate, it brings both to a higher profit than without collaboration.
On the other hand, other suggest that is it better for firm which have the same technology are in better position to collaborate because they will not face transaction cost and will not loose time for adaptation and understanding of the potential previous steps.

A second example of characteristic that needs to be considered is the “geography” of the collaboration. Some argue that the proximity permits better comprehension and physical collaboration, in the same building, same labs,… Others prefer to collaborate with a foreign company to become more international, to meet other way of working and seeing the problem, perhaps new way to innovate.

Finally, I believe that there is an uncountable number of criteria to take into account for a firm to decide to collaborate or not. I spoke above about few of them, but we can add to this uncompleted list the form of collaboration (vertical or horizontal), the kind of partner (private or public), the kind of contract with them (Joint venture or Research partnership agreement or…), the kind of research (apply or fundamental), …
In conclusion, I do think that each case needs to be look independently from each other; there are not general rules to follow. There are too many points that depend on variables which cannot be classed/ represent by criteria. Moreover, they are related and influence each other, so each case will be analysed differently.

References used:

[1]http://www.oecd.org/sti/inno/2093436.pdf
[2]http://www.strategie-aims.com/events/conferences/17-vieme-conference-de-l-aims/communications/1081-cooperation-en-r-d-et-creation-de-competences/download
[3]http://ses.telecom-paristech.fr/manant/documents/Manant%20-%20cooperation%20R&D%20avec%20competences%20heterogenes.pdf
[3]http://www.osmoz2009.com/pougne/EM1/Nouvelle%20theorie%20economique%20de%20l%20entreprise/Cours%20cooperation%20r&d%2012%2005%202009.ppt.
[4]http://www.sciencedirect.com/science/article/pii/S1090944304000584
[5]http://web.iese.edu/bcassiman/aerversion-final.pdf

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Vinayak Tirakaraddi
The primary risk associated with any R&D project for a company (or an institute) is the uncertainty in the success of the project, there by leading to a possibility of the company suffering huge losses and potential bankruptcy. To mitigate these risks, companies prefer to collaborate to share the risks. While this is valid argument, it primarily holds for smaller…
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The primary risk associated with any R&D project for a company (or an institute) is the uncertainty in the success of the project, there by leading to a possibility of the company suffering huge losses and potential bankruptcy. To mitigate these risks, companies prefer to collaborate to share the risks. While this is valid argument, it primarily holds for smaller firms who are at a greater risk at getting wiped out because of a potential failure of an r&d project. Larger firm have greater market power, and there is a risk for the society of a monopoly getting established if cooperation is allowed between large firms. To avoid these risks, large firms must be encouraged to rather collaborate with other organisations, not profit oriented firms, but research institutes and universities who have no intention to establish a monopoly.

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Ankur Kaul
I feel that the question of whether R&D cooperation is better or worse than competition is highly subjective, dependant as it is on multiple factors, for example, the relative maturity of the industry, the way the industry operates, the applications that can be achieved, among others. I will explore each of these in my assessment of this question. First, the position…
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I feel that the question of whether R&D cooperation is better or worse than competition is highly subjective, dependant as it is on multiple factors, for example, the relative maturity of the industry, the way the industry operates, the applications that can be achieved, among others. I will explore each of these in my assessment of this question.
First, the position of the industry in terms of the maturity it has achieved, is a very strong determinant as to whether cooperation is better or competition. In a nascent industry, where standards have not been established, I believe that cooperation is a better choice, because it will prevent duplication of efforts that are essential to bring the industry to a common platform. This will also prevent a better standard, or technology, from being relegated to the sidelines for not being accepted by market forces. The case of Betamax versus VHS is a case in point. In the emerging video recording industry, what one could argue was a better technology (Betamax) was overshadowed by a large-scale manufactured VHS, which caused it to have lower prices, and thus, a larger share of the market. As more and more companies adopted the dominant standard, the alternative was quickly decimated.
This brings me to the next determinant, the way the industry operates. It would seem that similar to the example cited is the competition that is being witnessed in the smartphone operating system market. However, I feel that unlike the video recording industry, cooperation for a dominant standard is not necessarily useful. This is because the operating system is a platform, and not an end product in itself. For smartphone users, applications that are run on the devices (called apps), provide the exact same user experience across platforms, making the platform itself largely inconsequential. For app developers, unlike the manufacturers of video cassette players or recorders who had to choose one standard, there is no variable cost for each app download, once the app has been created. Thus, to summarise, if the industry acts as an intermediate in a value chain, if the subsequent elements of the value chain can function equally well in the face of different standards, competition is the better option.
Finally, the applications that the industry is aiming at is another important determinant. To illustrate this point, the medical research/pharmaceutical industry is a good example. For the many newly discovered diseases, or mutating forms of known diseases, non-cooperation is a better alternative (I do not say competition, because research may not always be directed at appropriating market share). This is because the mutations of the disease may be unique to a certain region, and crucially, differ from one region to another. Thus, it is better to have different teams working independently towards a solution. Even when there is uniformity in the form of the disease, independent research efforts could help identify different (and improving) ways to deal with it, increasing overall societal benefit.
Thus, research competition versus cooperation can only be answered on evaluating various factors unique to the context.

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Mathilde Kurz
R&D cooperation or competition is a tricky issue. On the one hand, firms can have incentives to cooperate in order to split R&D costs, join two teams of scientists that complete each other by their skills or in order to be more productive in less time. Plus, a firm cooperates with an other one because this other firm can be…
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R&D cooperation or competition is a tricky issue.
On the one hand, firms can have incentives to cooperate in order to split R&D costs, join two teams of scientists that complete each other by their skills or in order to be more productive in less time.
Plus, a firm cooperates with an other one because this other firm can be specialized in a specific field that is needed for the new innovation. Instead of hire a private and very costly team of scientists, firms have interests to cooperate.

On the other hand, I think that cooperation is not always the best answer. Indeed, I believe that, for example, if a duopoly remains on the market and decide to operate R&D cooperation, firms will act as a monopoly which is bad for consumers’ welfare because a monopoly can increase its prices.
I think also that cooperation between two firms is not a great idea for oligopolies with three or four firms because it reduces competition. A decrease in competition might be bad for little firms on the market and for consumers (with less competition, prices go up).

Thus, in my opinion, I think that cooperation is a good idea for small firms with little budget on R&D. In that case, firms can survive on the market, innovate better and faster in order to remain competitive faced with bigger firms. Cooperation might also be a great idea when there is a lot of firms on the market with a lot of competition.
On the contrary, cooperation should be not accepted between two large firms with very high profit and market share. Indeed, those firms have already enough money to invest in R&D for their innovation, to hire brilliant and creative scientists, and so on. Plus, if they cooperate, small firms on the same market might not compete with them and thus would be out the market.

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Zhang Xiaomeng
In the complicate economic environment, relationship between firms is also uncertain: some firms compete in some fields but cooperation in other field. Especially for the technological firms, consider whether cooperation or competition is useful to research. Claude d’Aspemont and Alexis Jacquemin (2014 ) make a conclusion that cooperative behavior can play a positive role in industries having a few firms and…
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In the complicate economic environment, relationship between firms is also uncertain: some firms compete in some fields but cooperation in other field. Especially for the technological firms, consider whether cooperation or competition is useful to research.

Claude d’Aspemont and Alexis Jacquemin (2014 ) make a conclusion that cooperative behavior can play a positive role in industries having a few firms and characterized by R&D activities generating spillover effects. They separate relationship of firms into three game: In the first one, firms act noncooperatively in both output and R&D. In the second game, they introduce cooperation in R&D, the second stage remaining noncooperative. And in the third game, firms cooperate in both stages of the game. They expect that for a given level of R& D, the collusive output is smaller than the noncooperative one. Similarly, the collusive amount of R&D varies for reasonably large spillovers, higher than in the fully noncooperative equilibrium. Meanwhile, the amount of R&D in the case of collusion in both output and R&D is higher than in the case of pure R&D cooperation. So we can suspect that less competition in the product market allows the firms to capture more of the surplus created by their research, and which also help firms to reduce R&D cost. Claude d’Aspemont and Alexis Jacquemin (2014 ) also make research out that by maximizing social welfare requires not only more production but also a higher level of R&D than what is obtained with any of the previous noncooperative and cooperative equilibria. Cooperation in R&D increases both expenditures in R&D and quantities of production, whenever the spillover effect is large enough; otherwise it is the reverse.

The research of Herbert Dawid, Peter M. Kort and Michael Kopel (2013) expounded their point of view that positive effect in R&D cooperation are necessary to make more profits for firms than R&D competition if the new product is neither a close substitute nor a strong complement of the established product. From firm’s prospect, product innovation by under investing and high profits for the new products which is a substitute to the established products, and over-investing and lower profits of complements product. If the new product is neither a close substitute nor a strong complement of the established product, these implicit costs outweigh the gains of cooperation. These gains consist not only of reduction of expected innovation time, but also of a reduction in capacity adjustment costs for the new product.

What we can get from these recently research is that, cooperation between firms for innovation make more profits and better for firm’s innovation than noncooperative firm and the R&D competition. Meanwhile, R&D cooperation prefer to work from welfare prospects, the government also need to make policy stimulate R&D cooperation.

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Akashdeep Srivastava
R&D co-operation and competition are both important aspects for social welfare. While R&D co-operation might be beneficial to the firms leading to reduction in both duplication of efforts and wastage of resources and also promoting technological innovation, the same co-operation can cause issues like some firms dubiously utilizing the research of another without making any sincere efforts, formation of cartels…
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R&D co-operation and competition are both important aspects for social welfare. While R&D co-operation might be beneficial to the firms leading to reduction in both duplication of efforts and wastage of resources and also promoting technological innovation, the same co-operation can cause issues like some firms dubiously utilizing the research of another without making any sincere efforts, formation of cartels leading to losses for the consumer.

While the issue of R&D spillover is explained in the article, other causes of R&D co-operation can be determined with simple laws of economics. Firms might be more interested in R&D co-operation (and governments willing to allow so) when they cater to the same products but different geographical markets. A firm selling a MRI machine in Japan would like to partner with one selling in Germany (provided none of them plans to sell in it’s partner market in the nearby future). Firms might also be willing to co-operate with due approvals from governments when they cater to different products that are not substitutes of one another. For e.g., a firm fertilizer manufacturing firm might be easily willing to share its advances in a manufacturing process to a biochemical firm.

Other factors might also include situations when there are two (or more) hypothesis and testing a single one requires immense use of resources, capital and time. In this case the firms might agree to work on single hypothesis and share the enormous cost of failure. This might be more relevant in pharmaceutical industry. Government incentives and regulations are also an important factor influencing the co-operation between firms. The incentives by the Turkish government led to several co-operation agreements between automotive manufacturers and their vendors.

Thus a gamut of factors define the level of co-operation between various firms. While these always benefit the firms (sometimes all and sometimes a few), care should be taken to introduce regulations where these become beneficial to the society too and the firms don’t profit at the expense of the consumer by prevention of competition.

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Wenzheng Wang
Both competition and cooperation have their advantages and disadvantages.Competition can undoubtedly spur innovation.Company can earn profits only through decreasing cost and innovating under the fierce competition. But spillover effect has a direct relationship with the degree of competition.In the environment with fierce competition, the innovation company cannot earn expected benefits because of large spillovers which really have negative impact on…
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Both competition and cooperation have their advantages and disadvantages.Competition can undoubtedly spur innovation.Company can earn profits only through decreasing cost and innovating under the fierce competition. But spillover effect has a direct relationship with the degree of competition.In the environment with fierce competition, the innovation company cannot earn expected benefits because of large spillovers which really have negative impact on the incentive of innovation.And for cooperation,as this article mentioned above that it can eliminate useless duplication of efforts.But sometimes companies not only cooperate in R&D,but also has some agreements on the production market.That is harmful to customer benefits and it undoubtedly violate the antitrust regulation.

So how should we choose? There are several factors affecting companies’ decisions. As Claude d’Aspremont and Alexis Jacquemin mentioned in their paper, spillover effects which are influenced by difficulty level for reverse engineer,the strength of patents and the degree of competition in the market play an important role in making decision. Company should choose cooperation when spillovers are big and they should choose competition when spillovers are small.

Firstly,competition will have a huge risk if the innovation is easy to reverse engineer or independently discover, because the innovation may be rapidly imitated by other companies before the innovative company achieving expected profits .So under this situation,cooperation is a better choice because of reducing risk and saving the cost of R&D. On the contrary,the innovation is hard to reverse engineer.It means that the company can keep the secret for a long time and achieve expected profits even excess profits during that time.So the best choice for the innovation company is competition.Secondly,the strength of patents can also affect the choice in R&D.Under the perfect protection system of patents, companies can achieve more profits by protecting its innovations efficiently and effectively. However,when the company cannot protect its innovations,they will choose cooperation for saving the cost of R&D and spreading risk. Moving to the aspect of the degree of competition in the market,I think it has direct influence on R&D spillovers. Griliches(1979)thinks that there are two categories of R&D spillovers: rent spillovers and pure knowledge spillovers. Rent spillovers means that the price of innovative products cannot reflects it high quality clearly. because of the stress of competition.There are many substitute products in the fierce competition market,so the innovation company cannot set a suitable high price for the innovative product.And in the monopoly market,the effect of the rent spillovers is quite small.

All in all,when companies invest on R&D, they should consider many factors to decide which way they should follow, competition or cooperation. And R&D spillovers is the most important one while other factors affecting the choice of company through it.

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Fares Yanis
Firms conduct R&D because it can generate the knowledge to produce new products or to produce existing products at lower cost; firms can use the knowledge directly or they can sell it for others to use in production. In recent years, partly because of the rising concern over national competitiveness, the effectiveness of market forces in spurring private firms to…
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Firms conduct R&D because it can generate the knowledge to produce new products or to produce existing products at lower cost; firms can use the knowledge directly or they can sell it for others to use in production. In recent years, partly because of the rising concern over national competitiveness, the effectiveness of market forces in spurring private firms to conduct R&D has been questioned. Empirical studies have found that the social benefit from R&D could be greater than the benefit available to the innovator .[1] Bernstein and Nadiri, for example estimate that the social rates of return to R&D investment in both the chemical products and nonelectrical machinery industries were roughly double the corresponding private rates of return in 1981.

At a fundamental level, the gap between social and private incentives arises because an individual profit-maximizing firm ignores the effects that its actions have on the welfare of consumers and on the profits of other firms. Hence, to the extent that private R&D activities raise consumer surplus or generate positive externalities that accrue to other firms, the incentive to conduct private R&D is too low. Of course, to the extent that the externalities associated with R&D are negative.
A variety of economic and political forces can produce a spread between private and social incentives to conduct R&D is too low. Of course, to the extent that the externalities associated with R&D are negative, the private incentive is too high. A variety of economic and political forces can produce a spread between private and social incentives to conduct R&D. Technological « spillovers » are one source of divergence : if one firm can employ the research done by another firm without purchasing the right to do so, then the private investment incentive tends to be too low because the firm making the investment decision does not count the spillover as a benefit. Some other sources of divergence could be that the production of new or cheaper products frequently depends on access to complementary technologies and products or even on government policies.

[1] Bernstein and Nadiri (1988, p.433)
http://www.kof.ethz.ch/en/publications/p/kof-working-papers/275/

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Maxime Vigneron
According to the analysis of Claude d’Aspremont and Alexis Jacquemin in their classic paper: “Cooperative and Noncooperative R&D in Duopoly with Spillovers”, the degree of R&D spillovers is an important factor affecting the choice between cooperation and competition in R&D. The argument is quite simple, assuming companies behave strategically when spillovers are large, R&D cooperation leads to more R&D than R&D…
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According to the analysis of Claude d’Aspremont and Alexis Jacquemin in their classic paper: “Cooperative and Noncooperative R&D in Duopoly with Spillovers”, the degree of R&D spillovers is an important factor affecting the choice between cooperation and competition in R&D.

The argument is quite simple, assuming companies behave strategically when spillovers are large, R&D cooperation leads to more R&D than R&D competition but when spillovers are small there will be more R&D if companies make R&D competition. I will discuss this intuition by looking at wich phenomenons are beside the spillovers width.

Firstly, for a firm making R&D competition, it knows that it will not compete with others firms about the innovation and therefore it will be the only one to enjoy the benefits (Besanko, Wu, 2013). It will enjoy larger spillovers which can be very motivating for a firm and therefore leads to more creativity and efforts in R&D (Ferrari, Goethals, 2010) wich is also good for public.
In the contrary, firms making R&D cooperation have to face more competition and to share the benefits from the innovation.
(This advantage could be linked with the patent race we discuss in the previous papers.)

Secondly, the market structure affects the spillovers and the incentives to cooperate or to compete. If a firm is a monopolist or quasi-monopolist, it has no incentives to cooperate with small rivals or new entrant because the spillovers will be higher if they win a patent race than if they share the benefits from a cooperative R&D.

On the other hand, R&D cooperation gives also many advantages to firms as d’Aspremont and Jacquemin said in their paper: “Cooperative and Noncooperative R&D in Duopoly with Spillovers”. Firstly, the economy of scale, when two firms cooperate in R&D, they share the costs and spread them over a larger quantity. Which in some way gives larger benefits or spillovers

Moreover, by cooperating the two firms will gather their ressources and their knowledges. Those synergies will alloys the two firms to launch better products and to launch them sooner than in a R&D competition case.
These two factors gives larger spillovers to the two firms cooperating in R&D .

Cooperation and competition present both advantages a critical factor could be the type of market in wherein the firm evolves.
In a sector as the luxury goods where the profits don’t come from patent or R&D but from brand name, cooperate is often more profitable than investing by it’s own.

In conclusion, I think both cooperation and competition have advantages and disadvantages, the choice of one of them will depends on which phenomenons ( economy of scale and synergies vs. patent and monopolistic market) give the more spillovers to the firms.

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Brodheim Dimitri
Before launching a product on the market, firms have to develop the product. But the way of developing a product for a firm is like the way of selling the product: the firm can compete with the others or cooperate. According to Claude d’Aspremont and Alexis Jacquemin, firms compete or cooperate while the spillovers are small or large respectively. But…
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Before launching a product on the market, firms have to develop the product. But the way of developing a product for a firm is like the way of selling the product: the firm can compete with the others or cooperate. According to Claude d’Aspremont and Alexis Jacquemin, firms compete or cooperate while the spillovers are small or large respectively.
But the choice between competition and cooperation depends on more factors.
To begin, I will quickly explain why this choice is important. Then, I will give the advantage of the R&D competition and the R&D cooperation. To finish, a short conclusion to remain that the decision depends on other things than spillovers.

To begin, let’s remain that a firm decides to invest in something if expected revenues are larger than fixed cost. Revenues are (1) hard to appropriate (risk of underproduction, positive externalities for other firms, etc…) and (2) uncertain (due to the market, the human factor, etc…) while (3) fixed cost is a large initial investment. To help firms to invest, there are several solutions: subsidies, tax deduction, venture capital, routinization, secret, lead time, intellectual property right, etc… But what about the knowledge?
If firms decide to cooperate, the revenue can rise due to synergies but also decrease due to division. About risks and costs, respectively they are shared and there is an opportunity to earn more money due to scale effects.

So why sometimes, firms choose to compete if risks and costs are shared?
Are spillovers the only factor which decide if firm competes or cooperate?

On one hand, a firm can decide to compete in R&D if the degree of competition is high or if the product life cycle is low (in order to maintain each market share). It is the case for the mobiles-phones sector or the software sector; each wants to beat rivals and implement news apps in order to win market share. On the other hand, a firm can decide to cooperate in R&D if the product life cycle is long or when the risk’s level is high. It is the case for the automobile (Example: VW and China’s FAW: http://www.autonews.com/article/20141010/COPY01/310109949/volkswagen-deepens-r&d-cooperation-with-chinas-faw) and aviation sector.
On the other hand, the choice to compete or not also depends on the size of the company. Indeed, because large companies have sufficient funds, the necessary infrastructures and the expertise, they are more suitable to compete than small companies which make more benefits by cooperating, due to the outweigh costs, the sharing risk, the pool knowledge, and so will gain market share rapidly.
Moreover, the choice can also depends on the position of the firm; if the firm is the followers, in order to escape from its non-profitable market position it will more easily cooperate. Otherwise, if the firm is the market leader, it will compete to decrease the risk of losing its dominant market position.
In addition, the distance between companies, not only the geographical location but also the business activity or the cultural background can decrease the interest to cooperate due to less benefits.
In conclusion, R&D competition or cooperation doesn’t depends only on the spillovers size, there are many factors that firms have to take into account to choose the most strategically way; the degree of competition, the size of the company, the market position of the firm, the distance between firms which want to cooperate, etc… and to find the good strategy, firm also have to compare the advantages of both.
For example, a start-up, by cooperating, can split the costs of R&D and will earn more due to the elimination of the duplication of R&D efforts (the firm doesn’t need 2 workers since only 1 is needed). Furthermore, the cooperation will also enhance the quality of the innovative output because each firm concerned is focused on its core strengths.
(Example :http://www.irishtimes.com/business/sectors/health-pharma/french-co-op-takes-50-stake-in-irish-r-d-company-1.2000962 : InVivo decides to cooperate: ““It will strengthen our engagement with our customers, the InVivo cooperative members, and is a major endorsement of Life Scientific’s continued capacity to innovate on a global scale” to strength their engagement with their customers (and catch more market share) and to innovate on a global scale (enhance the quality of the innovative output))

Otherwise, a firm can choose to compete in R&D in order to, for example, avoid costs of R&D cooperation like the threat of collusive agreements, secret information, loss of control/ownership, etc… and by choosing an R&D competition strategy, it will enhanced a diversity of the innovative output and stimulate innovation thanks to patent races.

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Florian Simon
Since decades, governments has been trying to boost innovation by giving incentives to firms thanks to public policies. Also, private solutions has been found like secret. But, all these solution are about R&D competition. What if cooperation would be a solution? In this comment, I will discuss the advantages and disadvantages of both cooperative and competitive R&D. First, let's talk about R&D…
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Since decades, governments has been trying to boost innovation by giving incentives to firms thanks to public policies. Also, private solutions has been found like secret. But, all these solution are about R&D competition. What if cooperation would be a solution?
In this comment, I will discuss the advantages and disadvantages of both cooperative and competitive R&D.

First, let’s talk about R&D cooperation. I would say that, first, it could, obviously, avoid the costs of R&D competition. Indeed, it could delete a part of R&D costs coming from duplication (economies of scale and especially if the degree of differentiation is quite small). A second point is that cooperation gather all the strenghts of each of the members of the agreement in the case that R&D is well managed. Therefore, quality of the innovation will increase. Finally, in the case that the firm is a start-up and taking into acccount that R&D costs are very high, it would be preferable for the start-up to cooperate in order to split the costs of R&D.

Second, let’s talk about R&D competition. I would say that even if thee costs of R&D in the case of competition are very high compare to cooperation, competition stimulates innovation via race between firms on the road of “Patent”. Further, in this case, it’s not quality but diversity that will increase. Indeed, each firm has its proper strenghts and could innovate its proper product that will have a given degree of differentiation compared to others. In this way of thinking, I would say that R&D competition fits better with a market with high degree of differentiation.

To conclude, I would say that managers should act strategically at case-by-case depending on the market structure, the size of the company, the industry in which they operate and so on.

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Florian Barthélemy
Besides the factor of large or weak spillovers, Nisvan Erkal and Daniel Piccinin in Cooperative R&D under Uncertainty with Free Entry found other factors impacting the decision of cooperation or competition. They looked at the effect of free entry in oligopoly market and differentiated three cases: R&D cartels, RJV cartels (Research Joint Venture) and R&D competition. The…
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Besides the factor of large or weak spillovers, Nisvan Erkal and Daniel Piccinin in Cooperative R&D under Uncertainty with Free Entry found other factors impacting the decision of cooperation or competition. They looked at the effect of free entry in oligopoly market and differentiated three cases: R&D cartels, RJV cartels (Research Joint Venture) and R&D competition.

The consequences of free entry in oligopoly market are the following. First, during the R&D process, cooperative venture faces outsider participant competition which is not the case in duopoly for example. Secondly, after R&D process, if the results are kept by a few firms, they have a competitive advantage but on the contrary if some spillovers appear, new firms enter the market and in this case, new implications have to be analyzed.

The conclusions of the paper for each type of cooperation compared with competition can be summarized in two main points: the profitability for the firms and the welfare analysis. What is concerning profitability, their research brought the result that R&D cartels are never profitable which is quite contradictory with traditional researches. The justification is that due to free-rider effect, a firm in a R&D cartel earns less than an outsider firm (under the assumption of free-entry). About the case of RJV cartels, their profitability is depending on the size of the cartel: if he is sufficiently small, their individual investment is higher than for R&D competition and their profits too thanks to the internalization of positive externalities from sharing their research outcomes. The results are inverted with big RJV cartels.
To go ahead with the effect of RJV cartels on consumers’ welfare, Nisvan Erkal and Daniel Piccinin said that the effect change with the consumers’ preferences:

“This analysis implies that in industries with free entry, antitrust policy should pay careful attention to consumers’ preferences and may, therefore, differ between industries. This contrasts with the policy prescriptions in the literature with barriers to entry and deterministic R&D, where RJV cartels are always found to be welfare improving and, therefore, should be allowed. Miyagiwa and Ohno (2002) reach a more cautious conclusion. They find that it is both privately and socially optimal to form an RJV cartel if spillovers are fast and industry profits from sharing exceed those without sharing. In our model, however, these two conditions together are neither necessary nor sufficient for the social and private incentives for RJV cartels to coincide.”

It has to be noticed that other factors can be found such as the duration of the exclusive access with patent or/and trade secret before spillover effect for example. The rapidity of spillovers impacts the externalities for rival firms: therefore, for rapid spillovers, “the positive spillover effect outweighs the negative competitive effect” which leads to an increase of R&D investment if the firms are able to internalize the positive externalities.

As a conclusion, I would say that researches are non-exhaustive but try to set some guidance for regulatory institutions. However, it is always very difficult to take into account all potential impacts of an antitrust regulation, above all when laws change regularly.

ERKAL, N. and PICCININ, D., “Cooperative R&D under Uncertainty with Free Entry”, 2007.

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Fanny Delcroix
What gives firms the incentives to conduct investments in Research & Development ? Definitely, the answer to this question is found in the characteristics of the market forces. Firms invest in R&D in order to produce knowledege which they will use as a strategic tool. The knowledge derived from the investments evolve the firms to produce new products/services or new…
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What gives firms the incentives to conduct investments in Research & Development ? Definitely, the answer to this question is found in the characteristics of the market forces. Firms invest in R&D in order to produce knowledege which they will use as a strategic tool. The knowledge derived from the investments evolve the firms to produce new products/services or new production processes that could reduce its costs and so make her more efficient. These are the private incentives for conducting research & development investments.
In some cases, unfortunately, the social benefits from the R&D may be more important than the private benefits undertaken by the innovator and therefore it may exist a type of gap between the social incentives & private incentives. It drives firms to either cooperate either compete in their R&D investments. As seen in the latter article written by Mr. Belleflamme, one source of divergence between competition or cooperation comes from the degree of spillover.
Nevertheless, there exists some other factors affecting the decision .
One of the factors that encourage the cooperation between competing firms is the in-creasing costs as well as the deepening risk beared by the firms which are associated with the technological innovation. These latter lead firms to see the R&D cooperation as the best way to get return of investment given the costs and the risk. Moreover, empirical studies have shown that strategic alliances between firms from different countries sharply increased since 1970 in technological areas such as biotechnology, new materials and information technology (Hagedoorn 1996, 2002; Archibugi and Iammarino, 2002). The nature of the innovation obtains importancy as we’ve just seen how technological inno-vation leads to more cooperation between companies. Nevertheless,the cooperation in R&D between firms may eliminate or reducing costs, risk and duplication of effort but it also decreases the costs for the competitors. Which may lead to more aggressivity and perhaps in certain cases, it drives the competition at a higher level despite of the work-together in R&D.
Cooperation enjoys a certain amount of benefits in addition to costs sharing and risk re-ducing. It allows firms to share materials and knowledge that can raise their own re-sources. Incentives to cooperate are higher when the participant firms have complemen-tary knowledges or complementary resources. It allows them to enjoy freely or almost re-sources that they don’t own. Two firms having complementary materials will be likely to cooperate.
Another reason to participate to a R&D cooperative is the level of uncertainty which is understood in the « risk ». In general, R&D conducts to very important investments that cost a lot to firms. If the probability to success is low or not high enough, then firms will have incentives to share the costs and work together in order to find the innovation.

To conclude, cooperation in R&D may be the best option in some cases where there exists high risk, high costs, low probability of success and uncertainty. But some other factors such as the nature of innovation, the spillovers, the nature of re-sources/knowledges of each firm as well as the goal to attain must be taken into account. There doesn’t exist a right solution, such a decision needs to be analyzed carefully in or-der to minimize the drawbacks of cooperation. It shouldn’t be forgotten that, despite the agreement, the cooperative firm remains a competitor in most cases. Sharing information may be compulsory to go further in the innovation but firms can still use information lear-ned during the agreement to make a move as soon as the cooperation is over

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Xavier Alexandre Pedrós
From my perspective, the contribution of Bernard T. Ferrari and Jessica Goethals when considering the spillover factor as a key determinant of the choice between cooperation or competition clearly derives from the appropiability problem. Yet, the modern economic setting “solves” (at least in some sectors) the latter by the introduction of intellectual property. Therefore, one may believe that spillovers are…
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From my perspective, the contribution of Bernard T. Ferrari and Jessica Goethals when considering the spillover factor as a key determinant of the choice between cooperation or competition clearly derives from the appropiability problem. Yet, the modern economic setting “solves” (at least in some sectors) the latter by the introduction of intellectual property. Therefore, one may believe that spillovers are not the main point, if we put forward the strong assumption that patents avoid the free riding issue.

Just like we saw on the links between market structure and innovation, I will outline that additional factors inducing competition versus cooperation in R&D can be seen in terms of (1) capacity and (2) incentives. First, in terms of capacity, following Schumpeter, small firms are not able to innovate provided the existence of indivisibilities and high fixed sunk costs, uncertainty and their inability to take on inherent risks and externalities. From this perspective, firm size is a relevant factor explaining the choice of cooperation. Scattered markets, with small firms, may not be willing to invest in knowledge, while cooperation would create a pool of resources that would help overcome the market failures associated to knowledge production.

Secondly, in terms of incentives, one could also think of Arrow’s replacement effect. In a quasi-monopolistic market, with a large Significant Market Power (SMP) actor, small firms may be willing to cooperate in order to gain market share. Indeed, the replacement effect applies for all the firms already in the market. However, small firms have more profit incentive and should be more willing to cooperate in order to gain a ‘common’ competitive advantage towards the SMP firm. Seemingly, a monopolistic market should lead to the same conclusion: potential entrants, having a stronger profit incentive given the existence of a replacement effect on monopolist’s profits, may put forward cooperation in order to gain entry.

Altogether, the factors (1) size and (2) profit incentives derived from entry or increased market share in highly concentrated markets can also contribute to explain the choice between cooperation and competition in innovation. Indeed, both aspects are related and the second element is actually a strategic behavior. Moreover, both concern a setting where market structure (affecting firm’s size and profit incentives) impacts on the incentives not only to innovate but also how to innovate (cooperation versus competition).

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Nitish Aggarwal
As has been already discussed, spillovers are one of the key determinants which can guide a firm's decision of conducting R&D with a competitive or a co-operative frame of mind. However, it is certainly not the only one. Some other determinants that I believe play an equally important role are: 1)Firm skill sets: R&D cooperation between firms will work best if…
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As has been already discussed, spillovers are one of the key determinants which can guide a firm’s decision of conducting R&D with a competitive or a co-operative frame of mind. However, it is certainly not the only one. Some other determinants that I believe play an equally important role are:
1)Firm skill sets: R&D cooperation between firms will work best if individual firms have complementary skill sets, and the venture allows them to combine the things they are best at and create something useful for the society. Companies that are strong in similar areas/technologies will have lesser incentives to co-operate and would most likely instead compete with each other so that they can benefit by that quantum leap in research which can help them establish a competitive edge in the market.

2) Firm culture/history: Not every set of firms would collaborate very easily with each other. Every organisation follows different practices, has a different way of working and thinks differently. Hence sometimes, it might prove to be a tiresome process collaborating with other firms if your philosophies or goals don’t match. This can be especially true if the firms have had a very competitive history behind them. Sometimes, firms might have different goals in mind while collaborating with each other, and in these cases, if collaboration process is not smooth, firms might often diverge in their goals

3) Ability to appropriate post innovation benefits: If a firm is not able to appropriate post innovation benefits fully, either due to narrow IP protection features or due to lack of strong information holds within the company, it might have lesser incentive to compete with other firms for R&D. In such cases, I feel that firms might instead opt to co-operate with others in R&D, thus hoping to share the costs among themselves.

4) Uncertainty: In addition, I also feel that sometimes firms might be more inclined to co-operate especially if the research they are undertaking is one fraught with high uncertainty and risks of post innovation rewards. Usually, such research will require high investments as well and will mostly have high uncertainty with regards to their success probabilities. In such a scenario, I believe that firms would mostly like to hedge their positions and opt to co-operate with each other thus sharing risks.

Overall, I feel that these are some other factors that firms will consider before opting for R&D cooperation or competition. Firms will take this decision based on their strategic priorities and alignment with future goals.

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Chloé Jacquemin
In this short comment I will describe the factors that affect the choice between competition and cooperation in R&D. I will mostly focus on the factors which, when they are present, enhance the incentives to enter in a cooperative relation in R&D with the rivals instead of a competitive relation. I will point out 4 factors that raise the level…
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In this short comment I will describe the factors that affect the choice between competition and cooperation in R&D. I will mostly focus on the factors which, when they are present, enhance the incentives to enter in a cooperative relation in R&D with the rivals instead of a competitive relation. I will point out 4 factors that raise the level of cooperation: the nature of the cooperation agreement, the internalization of externalities, the uncertainty level and the nature of the innovation.

Before exploring the factors that affect the cooperation between rivals, it is nonetheless important to state that competition can also be an effective way of enhancing innovation. Indeed, competition can increase the motivation of being the first to discover something innovative and so increases the incentives to invest more in R&D. That being said, we can now come to the 4 factors:

1. The first one is the nature of the cooperation agreement can affect the decision. Damiano B. Silipo (2008) identified three forms of cooperation that he ranked from the weakest to the strongest in the incentives they create for R&D cooperation:

• In the case of coordination of R&D activities, firms decide the level of R&D by maximizing the joint profit. However, they conduct their R&D activities independently and remain competitors in the product market, a situation that leads to transaction costs and wasteful duplication of efforts.

• The cross-licensing agreements are contracts in which firms share research results (like knowledge production) with their partners.

• The more advanced form is a research joint venture. In this case, firms form a common lab that allows them to share information and save costs by eliminating useless duplication of R&D projects.

2. The second one is the internalization of externalities. In innovative markets, due to the fact that rivals create positive externalities since all the other competitors can freely access the results of R&D efforts, and these knowledge spillovers raise the prospect of free-riding. The result is that firms can decide to diminish their investments in R&D. By cooperating, however, firms can internalize these externalities and so, increase their incentives to innovate.

3. The third one is the uncertainty level. Kaz Miyagiwa and Yuka Ohnowe (2001) revealed the presence of uncertainty factors in the incentives to cooperate. Innovation is seen as a risky activity due to the presence of unknowns about the date of the innovation; while by cooperating firms can spread risks and use the cooperation as insurance. Damino B. Silipo (2008) also concludes that low uncertainty (i.e. high probability that the project will be successful) of innovation increases the incentive to cooperate.

4. The fourth and final one is that the firms’ decision of cooperating or competing can be influenced by the nature of innovation. Indeed, firms are likely to cooperate if it is easier to know the contribution of each R&D partners. For instance, in a cooperation on developing a new car, one can identify the contribution of each partner on the different components of the car. In the contrary, in the case of a venture for a new vaccine, it is harder to identify the contribution of each member, thus free-riding and fewer incentives to cooperate are more likely to happen.

To conclude, it seems that cooperation has more benefits than competition to enhance innovation. However, authorities should keep in mind that some kind of cooperation can lead to collusive behavior, which is detrimental for the consumer and has an ambiguous effect on the total welfare. As a consequence, anti-trust exemption for this type of cooperation should be appropriate.

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Saurabh Gupta
Just like most of the managerial issues in this world, giving one right answer to the question “R&D Cooperation or Competition” would not be the right thing to do. A lot of factors are there which should be taken care of while making a decision on pursuing a cooperation or not. The foremost thing would be the sector a firm…
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Just like most of the managerial issues in this world, giving one right answer to the question “R&D Cooperation or Competition” would not be the right thing to do. A lot of factors are there which should be taken care of while making a decision on pursuing a cooperation or not. The foremost thing would be the sector a firm is involved in.
Let us consider Pharmaceutical sector for instance. Pharmaceutical sector lives on high R&D costs and having multiple companies in the market make these costs repetitive. The worst case arises when the R&D is being done for a very important cause (for e.g. cure for Ebola). This is a “need” of mankind and not just a “want”. In this case, if each firm keeps spending its own money and time to come up [probably] with a similar solution. On the other hand if there was a cooperation, there would have been higher chances of coming up with a solution faster and with lesser costs.
Let us look at a sector like IT or Mobile phones industry, which are running more on the “wants and demands” of a consumer than a “need”. There are multiple competitors in the market and the market is running mainly because of the completion. If R&D cooperation is brought into these markets, it may lead to collusion and may handicap the innovating capabilities of the firms. When each of such firm runs on its own, it tries to outrun its competitor and which is where innovation comes as the main strength of the firm.
To sum up, the decision of going for a cooperation is totally based on the conditions of a sector and a market, and a significant thought should be given even for specific projects in the specific sectors to decide whether R&D cooperation should be supported.

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Yick Tang
Which strategy does a company or an enterprise decide to use? I think it depends on the spillover effect of research and development (R&D). If a company got positive externalities, it would decide to use competition as its strategy. Otherwise it would choose cooperation. It seems to make sense. However, cooperation is a mainstream. Many companies give up their positive…
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Which strategy does a company or an enterprise decide to use? I think it depends on the spillover effect of research and development (R&D). If a company got positive externalities, it would decide to use competition as its strategy. Otherwise it would choose cooperation. It seems to make sense. However, cooperation is a mainstream. Many companies give up their positive externalities for finding more potential value in cooperation. Apparently, companies lose the short period of value but in the future, they might earn more value. So now, the question is changed to “how does a company find a good cooperative partner?”

For eliminating useless duplication of efforts, companies have to find partners who have different advantages from self-technology, that is to say, cooperation achieve economies of scale. Companies can reduce costs, such as unit costs, transaction costs, communication costs, etc. Meanwhile, companies can also improve the efficiency of the use of corporate resources, such as capital, technologies, human resources, etc. Those corporation could result in a synergistic effect “1+1>2”

There is a case about which Apple corporate with Beats. Apple is a well-known company which has a lot of revolutionary products. Beats is an audio company which was by Dr. Dre and Jimmy Iovine, who are famous rap singers in the USA. Nowadays, when we listen to music, we always use a cell phone and an earphone instead of Walkman, MP3 players, MD players and so on. I think their cooperation is amazing because Apple has high quality cell phones and Beats has high quality earphones. As for Apple, More music fans would have more desires on buying its devices.
As for Beats, with the help of Apple’s influence, more people would know its brand. A big company like Apple needs to find cooperative partners. What will some smaller companies do in modern competition?

In my opinion, the technologies of a product are not from a company. They are from all over the world. I don’t deny that competition can stimulate the innovation of development but I think cooperation is a more efficient way to improve efficiency. A company is not a company now. It is an element of the global factory. All companies are connected. For example, Apple and Samsung have something similar. They are also the greatest opponent of each other. The most length and the widest competition is happened by them. Appropriate competition and suitable cooperation are the prefect dynamic balance for innovation development.

Reference:
http://en.wikipedia.org/wiki/Beats_Electronics

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Mario Medina
For sure the way the R&D cooperation or competition affects the R&D of the companies and their markets depends on the situation of each company, meaning that, not only depends in one fact but in a lot of them, for example the state of the market, the trend of the product itself, the spillovers. Although most of the information I have…
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For sure the way the R&D cooperation or competition affects the R&D of the companies and their markets depends on the situation of each company, meaning that, not only depends in one fact but in a lot of them, for example the state of the market, the trend of the product itself, the spillovers.

Although most of the information I have found in the web is purely theoretical, all the papers say that R&D cooperation could always be better than the competition, that is to say that it is more tangible the benefit of the R&D cooperation that the one in the competition, but it is true that that can only happen clearly when there is high level of spillovers. Talking about spillovers we have to concepts, “incoming spillovers”, which affect the rate of information innovative of the firm, usually information of the public domain, and “appropriability”, which affects the ability of the firm to obtain the benefits of the innovation. When the firm is involved in a cooperation agreement it can increase the incoming spillovers but sometimes decrease the appropriability which is not always convenient for it, however for other firms could mean the opportunity to acquire more benefits from the same R&D.

The R&D cooperation may avoid the competition between the partners involved in the agreement, but that doesn’t mean that there is no more competition between other firm’s nonpartners. “The aim of managing the external information flows is to maximize the incoming spillovers from partners and nonpartners, while at the same time minimizing spillovers to nonpartners” (1).

With R&D cooperation exist also less loss from the firm’s if the R&D fails but also less gains for each one if it works, but we have to consider that with this agreements we have greater amount of R&D investment and therefore greater efficiency of it.

In conclusion I think that the benefits from the R&D cooperation are bigger, but they have to be split between the members, which may imply a not large amount of benefits for the individual firm. Competition also encourages innovation but the recourses for the R&D are limited by the capacity of the one firm who is in it. For me there are two ways, if you have the control of most of the information, you know it’s valuable, and that the public domain’s information is not useful then you shouldn’t be part of a cooperation agreement and encourage a fierce competition. But if you don’t have much advantage over the others you should look for R&D cooperation; more likely if the spillovers are high.

(1)http://web.iese.edu/bcassiman/aerversion-final.pdf
(2)http://www.brookings.edu/~/media/projects/bpea/1990%20micro/1990_bpeamicro_katz.pdf
(3)http://www.oecd.org/sti/inno/2093436.pdf

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Federico Perciaccante
As we know from both past classes and common knowledge, the process of R&D is characterized by pros and cons for the innovator. The spillovers that affect the innovations a competition policy can be linked to the period in which the informations about the process leak: the classic situation is the one in which competitors take advantage from your effort…
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As we know from both past classes and common knowledge, the process of R&D is characterized by pros and cons for the innovator. The spillovers that affect the innovations a competition policy can be linked to the period in which the informations about the process leak: the classic situation is the one in which competitors take advantage from your effort in R&D by simply -and costlessy- observing the final product you came out with, and try to imitate or copy some technologies or industrial processes in order to cut their costs; the other kind of spillover is the one that afflicts the firm during the process of innovation, namely at the research stage, before the final product enter the market, and also prior to the discovery of a new technology which therefore doesn’t become available to the competitors.
Despite seeming similar, studies by D’Aspremont, Jaquemin (1988) and Amir (2000) show that they lead to different result in R&D performance.
In a competition-based ambient, those spillovers represent an obstacle to innovation, since firms are not incline to spend big shares of their budget in R&D just to see direct competitors getting profit from their efforts.
A system based on cooperation, instead, helps firms avoiding these fears, and also guarantees their efforts will be worthy with other measure, like preventive agreements, in which firms clearly states the terms of the cooperation, including the shares of costs and revenues. Other factors that stand for cooperation are the avoidance of uneconomical overlapping in term of research, that inevitably comes when two subjects are competing to achieve the same goal, or positively speaking the advantages related to the exploitation of synergies between firms.
Cooperation can also represent a profitable plan for firms that are not large enough to sustain the costs of R&D individually, and that at the same time would be doomed to death if they fail to innovate: again, to share the research’ efforts bring them a possibility to gain some secure profits.

As the article points out, it’s hard to chose between competition and cooperation, since they both have their share of good and bad points.
I personally think that for better understanding it we need to look at the phenomenon with a different perspective depending on the market and the subject of our analysis. For little-sized markets, which are composed by little-sized firms, competition could represent a good path to innovation, and it’s possible not to care about the side-effects on the general welfare. On big-sized trans-national markets, on the other hand, while the fight for the bigger share of revenues still constitutes a great motivation to innovate, I think at least a minimum degree of cooperation would be advisable, in order to make the consumers better off by a significant increase of the social welfare.

http://www.krannert.purdue.edu/centers/ijio/Accepted/2099.pdf

http://www.ecostat.unical.it/silipo/Pubblicazioni/SILIPO-WEISS%202005.pdf

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Stroobants Benoit
The overview about the debate between Innovation and Competition has already been covered in last comments. Indeed, we conclude this point by saying that a level of competition was necessary to influence innovation and develop new flourish business ideas. However, competition is not the only way to increase the efficiency of firms or economics in general. R&D researches are highly…
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The overview about the debate between Innovation and Competition has already been covered in last comments. Indeed, we conclude this point by saying that a level of competition was necessary to influence innovation and develop new flourish business ideas. However, competition is not the only way to increase the efficiency of firms or economics in general. R&D researches are highly risky, require a lot of efforts and large amount of money to put it in practice; therefore companies decide sometimes to work in the same way and align their actions to be able to reduce these costs and risks at a lower level.

Besides this highlighting, it seems obvious that it’s not the unique point to take into account when we talk about R&D. Actually, plenty of arguments could influence badly or positively the choice of different firms such as the conjuncture which is a major point in the strategy of these companies, as well as the environment within they develop their business; it could be stable, booming or downsizing and then, force enterprises to adapt their strategy differently when they are facing one or the other situation.

As far as I am concerned, we first of all have to analyse what’s the core business of each firm to see if they are compatible and if cooperation would be really feasible. For instance, in a sector such as new technologies, it could not be easy to find an agreement because each firm in this sector is perpetually fighting each other to reach the pool position on the market. Conversely, in a sector such as Food and Beverages, it seems quite easier for firms to cooperate and reduce the risks and costs they incur.

Anyway, as Belgian patriots, we are use to say, “Unity makes strength” but before launching a firm in a cooperation relation instead of competing each other, we have to well analyse the pros and cons to be sure that the downside of the deal stays low enough to keep this collaboration feasible.

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Thomas Ruelle
According to me, that text relates the same issue as the ones previously covered, asking whether or not patents/intellectual property rights do spur innovation, and what would be the optimal patent’s scope. Indeed, as Claude d’Aspremont and Alexis Jacquemin defend, depending on the level of R&D spillovers level, Companies will prefer or not to collaboratively poor money into a common R&D…
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According to me, that text relates the same issue as the ones previously covered, asking whether or not patents/intellectual property rights do spur innovation, and what would be the optimal patent’s scope.

Indeed, as Claude d’Aspremont and Alexis Jacquemin defend, depending on the level of R&D spillovers level, Companies will prefer or not to collaboratively poor money into a common R&D program. And from my perspective, the main driver of R&D spillovers is the regulation about information protection, and especially the strength and duration of patents and other intellectual property right tools. The intuition behind is at first glance quite straightforward: If available information is significantly restricted by strong and heavy patents, companies have the incentive to collaborate in order to be part of the joint R&D process and jointly own the information under a patent’s shield. On the other hand, if those protections are not existing or easily breakable, why organisations would bother collaborate when they can easily get access to competitors’ results of R&D?

Since the design of an optimal protection tool has already been covered in previous texts, let’s think about drivers, other than R&D spillovers that would explain when a company should invest into a joint R&D program with a competitor, and when it shouldn’t.

The first idea that pops up in my mind is not the availability of information but rather the availability of ressources. Let’s assume we have a small company with a strong expertise and a lot of information into a specific area but who hasn’t enough budget to successfully run their R&D department. Such a company would be interested in partnering with a bigger company (from a financial perspective) that could bring money on the table. I think that the small company would be better paid off if she enters in a R&D partnership with a competitor, jointly owns the intellectual right and shares profits, than if she invests alone a too small amount of money that will not enable the small organisation to optimally run the R&D. Investing on your own not enough money can sometimes be a huge financial waste.

Secondly, the expected financial return of your innovation represents another explanation. If the returns are very promising, then you can fully invest your ressources into a single R&D campaign. If the expected returns are really good but not that much promising, then a company could prefer to share R&D cost with another one. It is a way of sharing risks as well.

From a competitive perspective, I would be careful when considering partnering with a competitor in the framework of a R&D program. First of all, because those R&D programs are temporary, and your partner remains your competitor. As soon as the program comes to the end, the competition starts back. Therefore, before collaborating with your competitor, it is crucial to make sure that he only has access to what you agree him to know. You would not like your competitor to use confidential information about your company that he secretly gathered as former partner against you. Keep all the company’s doors closed but the ones you need to open to make the R&D collaboration a success.

Since the partners are competitors, there is a high probability that both firms have different opinions about major aspects of running R&D. It means, that in addition to increase the number of decision makers (two companies responsible for instead of only one), those people are not likely to easily reach an agreement. A lack of convergency in your R&D strategy significantly decreases the efficiency of the ressources you jointly invest.

To conclude I would say that R&D spillovers seems to make sense as main driver for R&D collaboration. But I would say that plenty other factors such as availability of ressources, expected results of your innovation, and your Partner/competitor behaviors are also likely to explain why companies decide to invest into a joint R&D program.

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Céline Rizzoli
Competition R&D and cooperation R&D have both positive and negative aspects that give or do not give incentives to choose them. Choosing competition R&D can be motivated by the following reasons. First, as usual in the case of competition, when someone competes against others, she will push herself further just because of the motivation of being first or because of…
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Competition R&D and cooperation R&D have both positive and negative aspects that give or do not give incentives to choose them.

Choosing competition R&D can be motivated by the following reasons. First, as usual in the case of competition, when someone competes against others, she will push herself further just because of the motivation of being first or because of knowing that she will be compared to others. If the firm invests on its own in R&D, it knows that it will not share the ownership of the new product with competitors and hence that it will be the only one receiving the results of the selling. This can give it a greater motivation and energy than if it has been part of a R&D cooperation and can achieve deeper thinking and harder working “leading to new levels of creativity”.(Ferrari, Goethals, 2010)

As mentioned above, the firm, which has not participated to a R&D cooperation, will be the only one allowed to sell the innovation. Therefore, it will enjoy a monopoly position which enables it to receive temporary high profits. (Besanko, Wu, 2013) By contrast, firms cooperating in R&D launches the innovation simultaneously. This increases the competition and decreases their profits. (Dawid, Kopel, Kort, 2013)

In spite of these factors to choose R&D competition, many ones also exist to opt for R&D cooperation. The most obvious reason is the use of the economies of scale. When firms cooperate in R&D, they pool their capacity. For instance, their laboratories or their scientist teams. Thus the expenditures in R&D are spread over a larger capacity. That allows each firm to spend less than if they were investing on their own. (D’Aspremont, Jacquemin, 1988)

Furthermore, gathering different R&D laboratories pools not only material elements from the different firms but also immaterial competencies. The cooperation allows the innovators working the different R&D laboratories to “learn from each other”, to “exchange ideas and techniques”. (Ferrari, Goethals, 2010) Each team of researchers can be specialized in a narrow domain and have a very different approach towards a given problem. (Ferrari, Goethals, 2010)

In addition, given the synergies created by the cooperation and the free “access to the R&D results of” each other, the firms can launch the innovation sooner as if they have invested in R&D on their own. (Dawid, Kopel, Kort, 2013)

In particular, according to Besanko and Wu, R&D cooperation provides more benefits to industries in which the technology changes rapidly as in the “pharmaceuticals, information technology and aerospace & defense” industries. (Besanko, Wu, 2013)

A last factor influencing the use of R&D cooperation is that R&D competition can lead to too low or too high investment regarding the optimal investment. The former case happens when the patent of the product gives a short period of protection or when there is not for the innovation a tough competition in the market. This situation leads to a free-rider problem. The firms which did not invest in R&D can benefit, quite fast after the short length of the patent protection from the new product thanks to low competition. As a result, the firms competing in that type of market will not invest enough in R&D. The case when there is too high investment happens in the opposite situation. The competition is tough and the patent gives a long protection period. “R&D competition gives rise to ‘winner-take-all’ competition”. (Besanko, Wu, 2013)

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Aditya Dogra
As rightly pointed out, spillover effects would be a key factor in determining whether there exists cooperation or competition between two firms as far as R&D goes. In my opinion some other determinants would be: 1. Amount of R&D investment required – in case of R&D projects where capital investment required is higher there would be a greater tendency to cooperate between…
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As rightly pointed out, spillover effects would be a key factor in determining whether there exists cooperation or competition between two firms as far as R&D goes. In my opinion some other determinants would be:
1. Amount of R&D investment required – in case of R&D projects where capital investment required is higher there would be a greater tendency to cooperate between two firms for these projects as the costs could be shared. For an example, in the power generation sector which demands heavy investment in infrastructure there is an R&D cooperation between two leading power generation companies – Tata Power and Exxaro for new projects in South Africa.
2. Collaborative capabilities – To cooperate is something not inherently present in the DNA of every firm. Even though industry dynamics indicate the requirement of R&D cooperation this would simply not work if firms don’t have the mindset to work in teams. Certain firms are more renowned for managing and working extremely well in such an environment. The past history of firms in forming alliances with firms would be a good indicator of the collaborative capabilities of the firms in question.
3. Behavioral uncertainty – It is very much possible that in an R&D cooperation if one of the firm feels that it has gained all it could from the project, it could break up the venture to work independently. This would certainly hurt the interests of the other partners in the R&D cooperation. In case behavioral uncertainty would be low there would be a greater tendency for firms to cooperate. Long gestation periods for projects would lead to low behavioral uncertainty among partners and a better case for R&D cooperation.
4. Knowledge Dispersion – If the knowledge required for an R&D breakthrough is dispersed among several firms i.e. no firm has access to all the specialized knowledge required then it would be a better idea for firms to work in a cooperative environment. On the other hand if knowledge dispersion is lower, in that case firms would tend to compete.

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Aurore de Halleux
On the one side, the competition stimulates the innovation. On the other side, the cooperation reduces the costs, risks and efforts of the companies. In my opinion, the other factors affecting the choice of a company for R&D collaboration or competition depends on the market and its position in this market. First, the sector in which the company is evolving is a…
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On the one side, the competition stimulates the innovation. On the other side, the cooperation reduces the costs, risks and efforts of the companies.

In my opinion, the other factors affecting the choice of a company for R&D collaboration or competition depends on the market and its position in this market.

First, the sector in which the company is evolving is a big element to take into account. For example, in the IT sector, it might be hard for firms to collaborate as they are big competitors and are often racing to release their products. For companies working in less competitive markets, like the micro-credit sector, R&D cooperation might be a good solution as the aim of such companies is to increase the welfare of (potential) clients.

Second, the position of the company might also influence its willingness to cooperate or not. A leader on the market will probably refuse to share its R&D department while two smaller companies will be keener to do their researches together to avoid big expenses.

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Laura J. Clarke
To induce innovation and therefore, improve social welfare and technology knowledge, firms needs to invest in R&D. However, there are two strategies to take into account to optimize this investment: or they could lean into competitive R&D, or they could go for the R&D cooperation. The difference will be seen in the society benefits, and therefore we need to look first at…
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To induce innovation and therefore, improve social welfare and technology knowledge, firms needs to invest in R&D.
However, there are two strategies to take into account to optimize this investment: or they could lean into competitive R&D, or they could go for the R&D cooperation.

The difference will be seen in the society benefits, and therefore we need to look first at the R&D spillovers.
As a remainder, the R&D spillovers are extent to which the R&D performed by one firm freely benefits other firms (as quoted above).
As well, we should establish the several positive and negative impact these two strategies would imply. Let’s start off with the cooperation strategy.

R&D cooperation is a good strategy because of several reasons. First of all it will imply time and money saving. Indeed, cooperation leads to sharing resources, assets, information, manpower, financial, time, technological know-how and skills, therefore less uncertainties, less preparation and so less money and time involved.

Secondly, it implies sharing ideas on development. Having more experts on a problem could lead to a better solution and therefore, will be benefic for the society.

Another point, I would like to point out is: it focuses on problem and not on competition. Again, following the previous point, allowing induce the effort in the problem and only on it, improving the work and resulting in a solution which would probably be better than if the firm would have worked alone, again implying a good for the society.

Furthermore, R&D cooperation will help small firm or new started to share their visions and ideas. As for example, imagine a start-up has a brilliant innovative idea but due to lack of funding, persuasion and size, the industry sector wouldn’t hear any of it, this would imply a loss for society.

Lastly, regarding the spillovers it would bring, it would help numerous of other firms and share brilliant discovery to the society, putting the firm into a customer/society oriented strategy. Which, indirectly will lead to draw attention to the sector and induce more innovation, research and discovery in the sector.

However, R&D cooperation has some drawbacks, if there’s a presence of collusion, it will decrease the market competition reducing motivation since market will appear less attractive.
These collusions could has well put a high price on their products or service which will harm society. It is a risk to take.
Lastly, in the very low probability of occurring, if there’s a disagreement between the firms in the collusion, it could lead to litigation cost and waste of time.

However, the second strategy, R&D competition could be considered as a good strategy. It can increase the motivation to innovate, and lead to social welfare. However, drawbacks are to be listed as well.
No spillovers so no technology sharing and that is a loss in the industry and the social welfare.

Without mentioning all the opposite benefits of the R&D cooperation, that is: sharing resource, cut cost and time saving.

In my opinion, I think we should induce R&D cooperation is better because there are more argument in favour, which implies a social welfare and increase knowledge about all new technologies.
Considering the balance in terms of benefit and drawback in the two strategies, the R&D cooperation seems as the best approach to induce innovation.

In conclusion, as mention above by Mr. Belleflame, in economic phenomena, there is no clear-cut answer. But good cooperation seems like a promising approach. However, we need to keep an eye on the firms and the rules to prevent from the negative impact it could involve.

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Stefano De Martini
If I would have to choose between R&D cooperation or competition I would say cooperation. I believe that is the best way to reduce risks, implement technology and a good way to compete but without trying to go into what could lead to a patent war; like it could be for Samsung and Apple for example. Obviously there a different…
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If I would have to choose between R&D cooperation or competition I would say cooperation. I believe that is the best way to reduce risks, implement technology and a good way to compete but without trying to go into what could lead to a patent war; like it could be for Samsung and Apple for example. Obviously there a different types of R&D cooperation and often in some markets is almost a necessity or at least the best way for the competitors. This could be the case of hybrid cars for example. Many automobile firms actually implemented hybrid technology together in order to reduce the costs and better improve the technology and than they would go on and compete on the same markets but with a better possibility of success.
This is a case, though, of a new technology; hybrid it’s not something that is already really common and it’s not as wide spread as it could be the market of smartphones for example where fierce competition takes place. Another example of cooperation between firms that are on the same market could be the case of Peugeot Toyota and Citroen; they worker together to create a really similar product, city cars, in order to explore knowledge and reduce costs for the creation of respectively 107, Aygo and C1. They were able to do so also because they kept competing in different areas of the same market.
With that being said, though, I think that the idea proposed by Bernard T. Ferrari and Jessica Goethals makes an interesting point; utilize rivalry as a “weapon” to boost innovation. While reading their paper I thought that I could be a good alternative to R&D cooperation. It’s obviously strictly related to the concept of competition but rivalry goes one step further. It enhances the incentives of the competitive firms to always do better than their rival, it’s not something not merely based on business. They, actually, make the example of the Italian Renaissance, a period of incredible creativity that stimulated creations and inventions at an incredible rate. The idea here is to create something similar for our days; Goethals actually thinks that there are similarities between the events of the Renaissance and the principles that have proven valuable in R&D organisations – she gives the examples of collision between diverse experts, providing loose guidelines, and establishing stretch goals. The different firms could compare each other work and it could be a push in trying to achieve a greater deal, a motivation for always reaching something new and innovative.
I definitely believe that this concept could be implemented and it might be a good direction to incorporate the two concepts of R&D it could lead better innovation while trying to compete in order to cooperate.

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Sruthi Chekuri
R&D cooperation is a great way for firms to work together on development and research. It could help avoid duplication of effort and reduce the costs and risks involved for all the organisations involved. There would be many firms with insufficient resources in terms of manpower, money, time, brainpower etc. to carry out research independently and successfully. In such cases,…
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R&D cooperation is a great way for firms to work together on development and research. It could help avoid duplication of effort and reduce the costs and risks involved for all the organisations involved. There would be many firms with insufficient resources in terms of manpower, money, time, brainpower etc. to carry out research independently and successfully. In such cases, it is beneficial to combine resources and share the benefits.

This could be harmful if collusion takes place through cooperation. If too many firms work together, this decreases competition in the market. This may have the counter effect of increasing the time and decreasing the motivation for the innovation in the first place, since the potential competitive advantage is comparatively less attractive. Also if firms decide to set high product prices through collusion, customers would be negatively affected.

Another disadvantage of R&D cooperation is the potential for disagreements between firms in the future resulting in unnecessary litigation costs. The development plan along with the sharing of benefits and the commitment of resources from both firms should be made clear. There would also be less flexibility for the individual firms to change plans due to unforeseen circumstances during the cooperation phase.

It seems to me that R&D cooperation is an effective measure for projects that involve high risk and are long term and which would likely not take off unless the risks and costs are spread out. For projects that are comparatively more short term and less expensive, individual efforts by firms may be more beneficial.

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Marta de Sousa Lucas Caeiro
Under a context of ideas as a common Knowledge, the emergence of a research question such “Do firms should cooperate or compete regarding R&D?” is raised. As observed by OCDE in 2002, in last 20 years the cooperation within firms have been increased and this tendency had led researchers to empirically understand the reasons and effects behind this reality. In…
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Under a context of ideas as a common Knowledge, the emergence of a research question such “Do firms should cooperate or compete regarding R&D?” is raised. As observed by OCDE in 2002, in last 20 years the cooperation within firms have been increased and this tendency had led researchers to empirically understand the reasons and effects behind this reality. In general terms, the major motive is dealt with input level, which involves knowledge spillovers, access to complementary Knowledge or cost and risk-sharing in innovation processes; but also regarding output in terms of technological and economic success. Oslo Manuel (2005) stated that cooperation in R&D requires active participation in joint innovation projects within organizations. The provision of new and improved products rather requires an active search-process involving several firms and institutions to tap new sources of knowledge and technology (De Bresson, 1996; Nooteboom, 1999; von Hippel, 1988). Hence, cooperation leads firms to become more and more interdependent on the know-how of other companies and institutions, developing complementary relations.

The main drivers of cooperation had been identified: publicly -accessible information that is introduced by side effects and the efficacy of the IP rights (Lopez 2008); complementarities between a firm´s internal and external resources which can induce partners to obtain innovative outcomes ( Miotti and Schwald, 2003 and Cassiman and Veugelers, 2002); absorption capacity, meant by technological opportunities and significant prior stock of Knowledge for effectively absorbing spillovers while cooperating (Cohen and Levinthal, 1989, Kamien and Zang, 2000, Bayonne et al. 2001, Fritsch and Lukas, 2001, Schwald and Miotti, 2003 and Belderbos et al. 2004). In addition, companies are willing to engage in innovation cooperation in order to reach expertise that cannot be afforded inside of their activities. These cooperations are defined as relations that seek for a given shared goal such as the developing of new and improved products or technologies. This usually happens between information technology industries (semi-conductor, data processing and telecommunications)- Arora and Gambardella (1994), Colombo, 1995. R&D cooperations could be seen as efficient strategy only if cost – benefit relationship of joint R&D is or is expected to be positive.

Becker and Peters, 1998, Camagni, 1993; Roberston and Langlois, 1995 identified some of these benefits: joint financing of R&D, mitigate multiple and wasteful duplication of R&D, reduction of uncertainty, realization of cost-savings, realization of economies of scale and scope and shorten development times. Nevertheless, there is also some shortcomings such as transaction costs (Coase, 1937; Pisano, 1990; Williamson, 1989), namely to coordinate, manage and control the R&D activities of different actors; hidden and unpredicted risks (uncertainty) as insufficient quality of assets, delays in development time, failure of research success, change in the relative contractual (market) power of the partners, moral hazard issues, since that single R&D efforts are not directly observed.

A theoretical approach on the effects of R&D cooperation can be summarized as above:

– the absorption of external resources conducts to an extension of firms’ technological capabilities to develop new and improved products, which is reflected in an increase of technological knowhow and improved skills.

– Assets, resources and information transferred in R&D cooperation enhance the research efficiency of firms, translated by higher rates of return of R&D with positive performances on firms’ innovation input and output.

– The number of partners cooperating efficiently with each other influence the efforts of firms to develop new products positively.

Several empirical studies underlined the relevance of cooperation between firms. In German manufacturing industry (1), R&D cooperation allowed to complement the innovation process, as well as an improvement on input and output of firms, measured through the intensity of internal R&D. On input side, cooperation in R&D between firms and institutions influences significantly the intensity of firms ´R&D activities; on output side, these relations increase the likelihood of producing new products, and the increase is higher, the higher the number of firms collaborating in R&D. Also another study (2) conducted in Germany showed that cooperation within firms enhances the turnover with market novelties and the share of cost reduction.

On the other hand, a study (3) that investigates the strength of cooperative relationships on R&D of Spanish firms, from the Technological Innovation Panel (2004-2010) arrived at the same outcomes already mentioned: firms which cooperate more are also more likely to invest in R&D in the following years, which has a positive impact on the probability of producing new knowledge, both product and process. Another study (4) based on emerged economies, focusing in Turkey came up with similar conclusions, stating that Turkish firms, which are involved in innovation activities detained a huger performance. This study showed, therefore that the cooperation in R&D also play an essential role in emerging economies.

Regarding briefly the R&D competition, when there is not ex ante cooperation, each firm decides which effort to choose to innovate, and thus, there is no technological spillover. This happens when there are strong IP rights or if firms are able to keep their innovations secret. Nonetheless, under IP rights the investments in R&D of one firm might affect others through competition in R&D and in product markets (competitive spillovers). R&D market effects emerge when R&D by one firm enables it to obtain a IP right that mitigate others innovation´s set possibilities.

The model developed by Katz et al.(5) suggests that the larger the product-market competition between firms, the lower is the probability of collaboration; an ex- ante cooperation is more likely to increase R&D incentives within firms that have large technological spillovers, that is, when the IPs are weak. Actually, it is more difficult to infer about R&D competition, in the sense that under imperfect information, it is hard to know what is the degree of competition within firms.
As it had been showed along this comment, there is more evidence that cooperation in R&D is more beneficial.
___________________________________________________________________________

(1) Becker, Wolfgang; Dietz, Jürgen “R&D Cooperation and Innovation Activities of Firms
– Evidence for the German Manufacturing Industry” -University of Augsburg, Germany

(2) Schmidt, Tobias; Aschhoff, Birgit “Empirical Evidence on the Success of R&D Co-operation – Happy together?” Zentrum fuer Europaische Wirtschaftsforschung

(3) Temel, Serdal ; Mention, Anne-Laure; Torkkeli, Marko “The Impact of Cooperation on Firms’ Innovation Propensity in Emerging Economies” Journal of technology Management and Innovation, November 2012.

(4) Fernandez Gual, Verónica; Segarra Blasco, Agustí “R&D, Innovation and Productivity: An analysis of Spanish manufacturing and Service Firms”, 2013

(5) Katz.L. Michael and Ordover, A. Janusz “R&D Cooperation and Competition” – New York University.

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Christophe Gérard
Firms use R&D in order to generate skills to create new products at lower cost. But why some companies will invest in R&D if it’s possible to learn from the other firm’s knowledge ? First of all, I think the cooperation is a good way to increase the social welfare and increase our knowledge about all new technologies. Why ? Because…
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Firms use R&D in order to generate skills to create new products at lower cost. But why some companies will invest in R&D if it’s possible to learn from the other firm’s knowledge ?

First of all, I think the cooperation is a good way to increase the social welfare and increase our knowledge about all new technologies. Why ? Because small companies could have a lot of great ideas and own great experts. But because of their too small budget, they can’t access to all expensive technologies. Moreover, if companies from different sectors collaborate, it could have a positive effect which could generate new ideas from two parts. It becomes also easier to new start-ups to come on the market with this sharing cost of R&D.

However, if companies working together, the competition decreases and the motivation to find new technologies could be reducing too. I think it’s logical. When you work alone and for your own interests, it will be more exciting and motivating to reach your own goal. If you share this goal with an other, each stakeholder of a project could relies on the knowledge of the others and you stop to stimulate or decrease your artistic innovation.

To conclude, I think it could have a positive impact sharing cost of R&D but it’s not a good idea to share it between too many companies. Moreover, to keep this positive way of work, the new group of work has to develop rules in order to have the best efficiency in their research.

Source :
http://www.brookings.edu/~/media/projects/bpea/1990%20micro/1990_bpeamicro_katz.pdf

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Shan Liu
There are several other issues that can influence the choice of R&D cooperation and competition. Firstly, the absorptive capacity of the firm can influence the degree of knowledge transfer and consequently having an impact on the decision of R&D cooperation. Many external R&D cooperation activities are organised as a means to complement internal innovation process. As the process of innovation are…
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There are several other issues that can influence the choice of R&D cooperation and competition.

Firstly, the absorptive capacity of the firm can influence the degree of knowledge transfer and consequently having an impact on the decision of R&D cooperation. Many external R&D cooperation activities are organised as a means to complement internal innovation process. As the process of innovation are path dependent, knowledge are accumulated over time rather than gained as a one-cut-off activity. Firms who lack the absorptive capacity may find it difficult to internalise the technology or innovation results, whereas firms with higher absorptive capacity will be better able to appropriate the value of the innovation, facilitate the knowledge transfer, and in general benefit from cross-fertilisation efforts. Moreover, the probability that firms are engaged in R&D cooperation depends on the intensity of R&D (Becker and Dietz, 2004). The existence of innovation barriers (the high risk profile of innovation activities, the tight financial schemes of internal innovation) raises the commitment of firms to cooperate with others in R&D in order to overcome these restrictions.

Another factor is the technology readiness level. Empirical studies indicated that the extent of joint R&D arrangements has correlation with the technological level of innovations.The increasing dynamic of technical progress, the complexity of technology had add stress of competition. As a result many firms are using cooperative R&D to react to this pressure, especially in launching new products. Cooperation with an external partner is more likely to be taken at later stages for example, when the firm is looking for a platform to introduce the new product to the market.

Furthermore, the empirical findings underline the importance of technological opportunities as determinants of R&D cooperation vs. competition. The higher the importance of external resources from suppliers and scientific institutions are, the higher the motivation for being engaged in joint R&D.

Lastly, the government policies can have an impact as well. A relatively flexible antitrust legislation towards technology cooperation can benefit the society as well reduce the incentives for industrial concentration, and generally a cooperative strategy is beneficial.

Reference:
Michael L. Kartz, Janusz A. Ordover. (1990). R&D cooperation and competition. Brookings Papers on Economic Activity-Microeconomics 1990. Brookings Institution: 137-153
Maria Louisa Petit, Boleslaw Tolwinski. (1999). R&D cooperation or competition. European Economic Review, 43, 185-208
Wolfgang Becker, Jurgen Dietz. (2004). R&D cooperation and innovation activities of firms-evidence for the German manufacturing industry. Research Policy, 33, 209-223

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Saad Ahmad
I agree with most of the comments on the point that there’s no single unambiguous answer to whether a firm should compete or cooperate with other firms on R&D. One dimension on which firms weigh their decision to compete or cooperate with other firms is gestation period of particular R&D projects. Cooperation undoubtedly leads to lower overall investment because of…
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I agree with most of the comments on the point that there’s no single unambiguous answer to whether a firm should compete or cooperate with other firms on R&D. One dimension on which firms weigh their decision to compete or cooperate with other firms is gestation period of particular R&D projects. Cooperation undoubtedly leads to lower overall investment because of sharing of resources and expertise. Say, for example, if Volkswagen and Porsche engineering jointly develop a piston head to be used in their respective upcoming models, the overall cost for development will be much lower due to common mold, manufacturing line, testing etc. thereby avoiding redundant duplication of effort and exploiting economies of scale. However, such cooperation on short term projects usually results in reduced flexibility which might affect the market position of the cooperating firms. The various steps in development will have to be designed to synchronize with the development phases of the respective models of the two manufacturers. Also, the engineers won’t have complete flexibility on design. In this light, cooperation on short term R&D projects may not be preferred by many firms.
Long term projects e.g. developing a hybrid car model could, however, benefit from shared resources and expertise resulting from cooperation with other firms on R&D. Such projects are not usually hard pressed for time. Hence, reduced flexibility is not much of a hindrance. Cooperation would result in lower investment as well as shorter development time for both firms.

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Zaniewski Jan
In my opinion, we should try to tackle this issue by distinguishing the size of the company that is developing R&D to see if they should cooperate or compete with others. Regarding the smaller companies, I think they should compete with other companies in terms of R&D. Indeed, they cannot spend that much investments for R&D as the bigger companies.…
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In my opinion, we should try to tackle this issue by distinguishing the size of the company that is developing R&D to see if they should cooperate or compete with others.
Regarding the smaller companies, I think they should compete with other companies in terms of R&D. Indeed, they cannot spend that much investments for R&D as the bigger companies. They can also try to specialize themselves developing exclusive knowledge specific to their businesses.
Then, for the bigger companies that have more investment power, they can easily cooperate together at the same level of investments. First, it’s better for the environment as a whole, because the companies can develop common knowledge faster, and share it with the whole network of companies of that sector. Then, for themselves, it enables them to cut in the R&D costs and do more efficient researches.
But afterwards, it would be good for the bigger companies to stop cooperating and start a competition to specialize themselves and get a separate advantage that would distinguish them between each other.
Now about the degree of spillovers between the firms, I totally agree with the view of the article. This is a very good way to predict if the companies should cooperate or compete. This point of view, linked to the idea of the company size would be, in my opinion, a good blend to help the management in their strategic decisions.

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Jean-Baptiste Ledoyen
I think a certain level of cooperation is needed in order to improve global R&D. This cooperation can be done between firms who are not on the same market, but which could benefit each other of the pooling of resources. One example could be a nutritional firm which will joint with a biomedical one. Both of them need laboratory with…
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I think a certain level of cooperation is needed in order to improve global R&D. This cooperation can be done between firms who are not on the same market, but which could benefit each other of the pooling of resources. One example could be a nutritional firm which will joint with a biomedical one. Both of them need laboratory with quite similar equipments. It’s a pity to see that many firms build huge complexes of R&D while their neighbours have almost the same. In mechanics it’s the same, some testers or other equipments could be shared by several companies.

In addition to the financial benefit, working together on R&D allows more connexions between team members. If the lunch roam, the rest roam or other extra facilities are shared by the companies, their employees can there discuss with employees of other firms and so they can give/share some advices or ideas.

We could so create some spaces, like incubators for SME’s, where several research centres will be there and the facilities roams will be shared by all of them. It looks like the method of Decathlon (Oxylane Group) which puts researchers of all its own brands in the same R&D centre. I know it’s easier for a firm to do that, there is no problem of competition, but the idea to gather researchers is there (indeed designing a new swimming trunks or a new tent is far to be the same, but some synergies can be created!). That’s also in order to benefit from this synergy that they develop their products in many sectors of the sport. They use their global expertise to develop new products in each brand.

I think universities could be one of the gathering places. They already have a lot of connexions with many companies, they already have some equipment (and it allows them to have more thanks to the investment of the companies), etc. There the atmosphere is already based on research without a lot of competition, there are centres of excellences, etc. Many ingredients are there to become a good partnership!

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Massot
Another aspect that could be taken into account is tht marketshare of the company. With a high marketshare a company could be a leader on its market and would have an incentive to invest in R&D so as to keep the others at bay. In the end the others would benefit from these investments as they become general knowledge but…
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Another aspect that could be taken into account is tht marketshare of the company. With a high marketshare a company could be a leader on its market and would have an incentive to invest in R&D so as to keep the others at bay. In the end the others would benefit from these investments as they become general knowledge but by then the company will have gained a significant advantage. A smaller company might be inclined not to invest in R&D since it will never be able to rivalize with the bigs company’s investment.
Another aspect that could be taken into account is the type of market. In a fast changing market such as technologies, investing in R&D might be the only way to actually stay in the game. Therefor companies are obliged to do so.

The analysis in the text doesn’t take into accont the possibility to protect the investment made with patents or industrial secret. If this becomes possible, it’s possible to limit spillovers and investments become more profitable.

Finally R&D cooperation could have a much higher cost due to the fact that the teams of the two companies have to cooperate without always having the same objectives in mind. What would benefit a company due to it’s organization, position and structure might not work for another one. There’s also the aspect of trust. By allowing anothe firm to cooperate with you, you might risk the chance of that firm learning things that they could exploit against you in the future.

All in all I think companies should invest in R&D maybe with a part of cooperatioon but never all of it in order to limit the risks.

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De Temmerman Yann
First we could think that cooperation between firms always is the best way to innovate. For the customers I think that it's true because the quality of the products will certainly be better with cooperation between the R&D department because they work together and therefore share their knowledge, their experience. But i don't know if cooperation for the companies is…
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First we could think that cooperation between firms always is the best way to innovate. For the customers I think that it’s true because the quality of the products will certainly be better with cooperation between the R&D department because they work together and therefore share their knowledge, their experience. But i don’t know if cooperation for the companies is always the best solutions.

For example if a company want to develop an innovative product, technology it’s maybe not a good solution to develop it with an other company. If every company use the innovation, there is no more a competitive advantage for you and it’s more interessant to try to develop your project alone and hope to maybe get a patent.

But an advantage of the cooperation is that you reduce the potential loss. Some companies may not be much money to devote to their R&D sector and so cooperation could be an opporturnity to develop new product.

When you want to cooperate with an other company you enough have to find the company. Thus a company with the same goals and that accept your conditions of the contract. I think that find a company like that and that is not your direct conccurent must be very difficult. Further there is somethimes too much competition between companies to work together on the same project. For example I don’t know that Coca-Cola and Pepsi would work together. The rivality between companies like this is too important and they prefer certainly work alone in their R&D department.

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De Kock Boris
As indicate in the paper of Claude d’Aspremont and Alexis Jacquemin, the opportunity of R&D cooperation is depending of the spillovers. If the anticipated spillovers are low, it’s most efficient to cooperate with anothers firms. Indeed in that event, cooperation between firms has some advantages: - Economies of scale - Hedge against the risk - Expenses distribution and avoiding of duplication of costs. On the other side,…
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As indicate in the paper of Claude d’Aspremont and Alexis Jacquemin, the opportunity of R&D cooperation is depending of the spillovers. If the anticipated spillovers are low, it’s most efficient to cooperate with anothers firms. Indeed in that event, cooperation between firms has some advantages:

– Economies of scale
– Hedge against the risk
– Expenses distribution and avoiding of duplication of costs.

On the other side, there is a free rider problem because some firms may be tempted to adopt opportunistic behavior to unilaterally benefit the efforts of others. In fact this problem leads to the failure of more than half of the cooperation.

Another advantage of the R&D cooperation is the ability to enter new markets. This is why many French companies install research centers in China.

Sources:
http://www.persee.fr/web/revues/home/prescript/article/rei_0154-3229_2003_num_104_1_3127
http://chine.aujourdhuilemonde.com/rd-en-chine-les-entreprises-francaises-font-le-choix-de-la-cooperation

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Tiago Fins Joaquim
Globalization has presented immense challenges for producers producers in countless industries. Competition grew very rapidly, prices were driven down and technologies have evolved faster and became more complex. Products now have a shorter lifespan in the markets and developing innovations has become more costly. In order to survive in the industry, a producer has no other choice than to develop…
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Globalization has presented immense challenges for producers producers in countless industries. Competition grew very rapidly, prices were driven down and technologies have evolved faster and became more complex. Products now have a shorter lifespan in the markets and developing innovations has become more costly. In order to survive in the industry, a producer has no other choice than to develop new products in a faster and more cost effective way.

However, due to the increasing complexity of products, it is not realistic to expect one producer to develop a new product from the ground up entirely on its own. Since spillovers and the risk (in regards to how the innovation will perform) are very likely to be high, a producer will prefer to develop a new product based on existing technologies, instead of developing its own. Even a huge company like Apple, which holds almost $150 billion in cash [1], uses technologies developed by other firms and even by one of its direct competitors [2]. This is also routinely done in the automobile industry. Industry standards made it possible to cut costs. Suppliers like Bosch are able to produce car components and sell them to multiple car manufacturers. These are usually parts that consumers will not regard as being determining factors when purchasing a car, e.g. wind screen wipers, tires or oil filters.

This R&D cooperation in the automotive industry can however go much further. A few years ago, Toyota and Subaru agreed to jointly develop an affordable sportscar. The result of this partnership was a model named Toyota 86, Toyota GT86, Subaru BRZ and Scion FR-S. The car is sold under three different brands (Toyota, Subaru and Scion – a Toyota sub-brand), each having higher recognition in different geographical markets. The three brands sell a quasi identical car that is assembled in the same factory in Japan. The idea was for Toyota and Subaru to enter (re-enter in the case of Toyota) a market segment. They weren’t willing to bear the R&D costs individually so a partnership made it possible for consumers to have a critically acclaimed alternative when looking for a new car.

References:
[1] http://blogs.wsj.com/cfo/2013/10/01/apple-now-holds-10-of-all-corporate-cash-moodys/
[2] http://appleinsider.com/articles/13/09/20/samsung-confirmed-to-be-manufacturer-of-apples-new-a7-chip-in-iphone-5s

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Marie Khamphanh
In my opinion, firms should collaborate in R&D. Indeed, according to D’Aspremont and Jacquemin, it would permit them to internalize their spillovers and to improve their R&D process (pooling risks, avoiding duplication of efforts, having economics of scale). However, there are other factors which have an influence on the company’s decision in building cooperation with another company. …
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In my opinion, firms should collaborate in R&D. Indeed, according to D’Aspremont and Jacquemin, it would permit them to internalize their spillovers and to improve their R&D process (pooling risks, avoiding duplication of efforts, having economics of scale). However, there are other factors which have an influence on the company’s decision in building cooperation with another company.

Firstly, the sector of activity has to be taken into account. For example, the pharmaceutical industry has always kept close links with universities and biotechnological companies. In fact, the biggest pharmaceutical firms have already worked together on non-cooperative projects such as the research of bio-markers to diagnose diseases and determine the efficiency of some treatments. Furthermore, in the high technology sector, another model is preferred the open source. For example, Android (which belongs to Google) is open source as Google releases the code under the Apache License. This code permits to the software to be modified and distributed by device manufacturers, wireless carriers and developers. This original model allows Android to be more reliable. But, in the meantime, Google which promotes the open source model keeps secret some elements of its R&D field such as the algorithm of its well-known search engine.

Secondly, governments’ support is a major factor of R&D cooperation. In general, they set up clusters. Michael Porter in his book, “The competitive advantage of nations” defined a cluster as a geographic area where businesses, suppliers and associated associations are concentrated in a specific field. In other words, it’s a geographic area where different organizations are located (companies of the same sector or of complementary sectors, universities, venture capitalists). These organizations collaborate with each other in order to boost their innovations (R&D) improve their profit and their productivity. Finally, governments can also invite firms to talk to each other and invite them in networking events in order to create relations between them and in the long term, make them collaborate.

References
http://www.bulletins-electroniques.com/actualites/71096.htm
http://en.wikipedia.org/wiki/Android_operating_system
http://www.economistinsights.com/technology-innovation/analysis/fostering-innovation-led-clusters

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Benjamin Sommeville
I think that it depends of each case but both competition and cooperation can be good for firms or for the society. They both can be the best option in different situations. In modern economies, industrial competitiveness is increasingly determined by the ability to create new or improved products or services. Research and development can therefore form an important part…
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I think that it depends of each case but both competition and cooperation can be good for firms or for the society. They both can be the best option in different situations.

In modern economies, industrial competitiveness is increasingly determined by the ability to create new or improved products or services. Research and development can therefore form an important part of any company’s business strategy, helping it to bring new products to market. Cooperation in the field of R&D is often essential to innovation, particularly in high technology sectors or pharmaceutical sector where the technical and financial risks are high.

Furthermore, a company may decide to carry out all of its R&D work by itself or it may prefer to collaborate with other companies in their R&D efforts. I think that R&D agreements may vary in form and scope. Under a joint R&D agreement, two or more parties collaborate with one another to carry out joint research work with a view to developing new products or processes more rapidly. Sometimes parties to joint R&D limit their collaboration to the “precommercialisation” (just the R&D stage). In other cases, however, parties extend their collaboration to the way in which they commercialize or exploit the results of the R&D. However, under certain circumstances, R&D agreements may cause competition problems. For example, where the parties to the agreement agree to fix prices or output, or to share markets. Problems may also be created if the cooperation under the agreement enables the parties to maintain, gain or increase market power.

Therefore, as said in the article, the degree of R&D spillovers seems to be the key factor : “When firms behave strategically, R&D cooperation leads to more R&D than R&D competition when spillovers are large but to less R&D when spillovers are small.” Indeed, the degree of R&D spillovers change the firm’s incentives on the way of cooperation or competition. Moreover, I think that others factors like the risk or the market might be very important in the decision to cooperate or not.

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Defoy Gilles
There is a law which works for a lot of different fields, the bigger, the stronger. And I think, once again, it also works for this case. Indeed, as mentioned in the article, there are lots of clear and concrete advantages to work together. But I also believe that big is good, obese is unhealthy. My point of view is the…
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There is a law which works for a lot of different fields, the bigger, the stronger. And I think, once again, it also works for this case. Indeed, as mentioned in the article, there are lots of clear and concrete advantages to work together. But I also believe that big is good, obese is unhealthy.

My point of view is the following one : the size is the main variable of this issue. Indeed, if you are a small company, except if you have the century idea, you need help to grow up. In this case, all the cost and risk arguments developed in the paper could be taken into account. Because the cooperation between small sized companies allows you to get more than one shot. In business, failure is something which often happens. If it’s on your own, you are in danger, if it’s half on your own, you are half in danger.

On the big sized companies’ side, the thought is different. A big company earns big money. So, in case of failure, it allows it to lose more without major consequences. But in case of success, the consequences are different, it could allow it to get a major advantage on its big sized competitors and win one “battle”. So what’s the point to share this new R&D progress with its opponents?

What if small and big firms cooperate? Some people could argue that this kind of cooperation could bring more flexibility to big firms and more means for small firms. It could be true in some cases but I think we can’t make a general law with this argument. Indeed, big companies aren’t elephant. Even if this is less obvious for them to concentrate themselves on precise topics – as a small firm could do – they are big enough to develop some clusters in some precise subjects. And for the small firms, we could assume that the lake of capital could be an issue too but association means compromise and compromise means that they are under the big companies’ will. So, they can’t no more act like they want which is one of the major advantages that small companies have.

We could show a lot of examples where cooperation between different kinds of companies works but as mentioned in the article, there is no clear-cut answer to this debate. However I think the size factor is key factor to analyse to determine if cooperation could work or not.

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Depreter
In the first view, I am in balance between the cooperation and the competition in the R&D because it is not an issue that has only one solution. I mean it’s in case-by-case. But when I look at more closely, I see that it would be better for the whole society if firms cooperate. I think that, in competition or…
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In the first view, I am in balance between the cooperation and the competition in the R&D because it is not an issue that has only one solution. I mean it’s in case-by-case. But when I look at more closely, I see that it would be better for the whole society if firms cooperate.
I think that, in competition or in cooperation, the time to find out an innovation would generally be the same. Indeed, when firms are not cooperating they all spend a lot in R&D expenditure, time, etc… But when firms cooperate, they can better allocate the R&D Process and resources which is not wasteful. It is also the same for all what is about the time during which firms invest in R&D. Because when they compete, they would like to be the first to file and so the first to innovate. It means that they will spend a lot of R&D in such a way to be the first to find out. And more there are firms, earlier it is likely to happen. But with regard to the cooperating firms, the time would also be shortcut because if they cooperate intelligently they will be able to minimize the time during which firms invest. But without wasting of time and money! That is all the difference between cooperating firms and competing firms.

Finally, firms do not decide whether to invest or not just according to the time and financial aspect. It depends on the structure of the market. I mean that if there is a monopolistic firm it has no incentive to collaborate because they will have to share the benefits they have done thanks to the innovation and thus it wouldn’t be the leader of the market anymore. The monopolistic firm would lose more money by this way than by investing alone. But if the structure of the market is the perfect competition, it would be better for all the firms to collaborate so that they could better allocate and manage the R&D expenditures. Moreover according to the Pareto theory of the “comparative advantage” the better allocation is a way to have more efficiency.

To conclude, I think the governments should establish some rules that give incentives to the firms to collaborate between them, because it is better for the consumer (innovation more rapidly discovered, etc…) and the society as a whole.

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Subhash Bharadwaj Pemmaraju
The choice between cooperation and competition can be influenced by several other factors as well: 1. Consider the scenario where the research can be protected by a patent. As we have seen earlier in the case of pharmaceutical companies, patent protection can make competition a better choice for companies because they will have a degree of monopoly over the product for…
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The choice between cooperation and competition can be influenced by several other factors as well:
1. Consider the scenario where the research can be protected by a patent. As we have seen earlier in the case of pharmaceutical companies, patent protection can make competition a better choice for companies because they will have a degree of monopoly over the product for a certain period of time. There were also arguments to support the idea that competitive rivalry with patent protection breeds innovation in the pharma industry .
2. The choice also depends on which industry we are referring to. For example, intense rivalry in the smartphone segment has clearly helped innovation foster with companies like Apple and Samsung fiercely competing on the R&D front to give faster lighter and better smart phones. However, there are many examples in the automobile industry of very successful partnerships where innovation has fostered because of cooperation such as Maruti-Suzuki in India and several others globally.
3. Finally, it also depends on the extent of competion in the industry. For example, in an oligopolistic industry where there are very few players rivalry is preferable because it creates a sustainable competitive advantage and thus encourages companies to innovate . this clearly benefits society. However cooperation might not always benefit society because the incentive to innovate is less if all the companies in an oligopoly cooperate on various terms. However, in a highly competitive environment where there are several players, it may be that cooperation is the better choice and can help gain more market share in a fragmented market.
These are some of the additional factors to be considered when deciding whether cooperation or competition is a better choice for companies.

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Julien van Cottem
The question of competition or cooperation really depends on the kind of industry involved and especially on the point of view of the actors. Surely, a firm is looking for a unique competitive advantage amongst the others in order to secure more market shares. But the unique nature of an advantage is difficult to complete and to be sure that…
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The question of competition or cooperation really depends on the kind of industry involved and especially on the point of view of the actors. Surely, a firm is looking for a unique competitive advantage amongst the others in order to secure more market shares. But the unique nature of an advantage is difficult to complete and to be sure that it could not be copied, very expansive. To achieve these goals, the innovation cannot be “unfinished”… It must be almost perfect! Competition seems to be better for the quality of a technology and the profits of his inventors.

On the other side, government and consumers want to have the best service and the best products for them. In that case, it is much efficient to work in groups. “Two brains are much valuable than one” and firms move forward together sharing costs and profits of an innovation. This way could enhance the whole economy of a sector and bring all the industry to the next level.

It is a matter of equilibrium between specific factors of an innovation. Is it unique? Is it something that makes the difference for a firm? That is what the competition way looks for. The danger of this way is to create a monopoly. Or, with the cooperation: Is there enough incentive to take part in an innovation? Will it serve me as it serves the others? And the danger is clearly that firms can’t find any motivation and then the sector does not evolve anymore.

The good way appears to be between competition and cooperation. Between take personal profits of an innovating work and the evolution of an industry by sharing a new technology.

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Jori Sihvonen
After reading comments I feel like there is little to add. I agree with Guillame d’Oreye that both cooperation and competition are good for the society, but which is better depends on the goal of the society. The optimum can also be a mixture of these, where to a certain point R&D is cooperative and later competitive to differentiate. One…
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After reading comments I feel like there is little to add. I agree with Guillame d’Oreye that both cooperation and competition are good for the society, but which is better depends on the goal of the society. The optimum can also be a mixture of these, where to a certain point R&D is cooperative and later competitive to differentiate. One must also remember that money spent on R&D is not a guarantee for innovation

I would like to approach this question of what affects the choice by pointing out that there is no one correct answer that suits all companies or markets. For instance if a two company have been struggling to keep up with their more innovative competitors, it would seem wise to cooperate “to catch up”. In this situation the already more innovative company would probably choose to continue competing. These choices are also in line with the regulations, that companies with over 25% market share don’t have the choice for cooperation (other post from this week).

One can also look at this issue from the point of view of different global markets. If a country has little or no production in a given industry, but wants domestic produce then R&D cooperation is a likely option. The cooperation can also be between universities, research organizations and companies to produce or increase the competitiveness in an industry. For instance I remember reading that Apple has been involved in multiple government funded research projects, where it could guide the research in a suitable direction. Then when the research program has ended, Apple used the partially public created innovation, and developed it forward into their own products. Thus they were able to cooperate in the primary stage of research to have a level of technology which is usable and then later on develop product specific applications and further innovations in the area, which will then be used and patented completely by Apple. With this type of R&D US has been promoting the competitiveness of it’s telecommunications industry. Similar examples are in the EU, where companies take part in mainly EU-funded research projects to research a new area.

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Yasuhiro Minami
Firstly, when I read this sentence, I think it is natural R&D cooperation is more effectively than competitive R&D because if firms cooperate with each other for R&D, they can get more money and more diversity of point of view for the approach for innovation. So, I want to think and write here why they choose competitive R&D instead. I…
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Firstly, when I read this sentence, I think it is natural R&D cooperation is more effectively than competitive R&D because if firms cooperate with each other for R&D, they can get more money and more diversity of point of view for the approach for innovation. So, I want to think and write here why they choose competitive R&D instead. I come up with some reasons for this.

First, one of the reasons is “the value of the company”. Now patent systems defend innovations from copying and also defend the profits of the innovations. So, in this time I want to talk about other aspect of the innovation than profit. That is “value”. Innovations make firms value much better. We can also say that customers come to have very good impression to a company which create innovations. This is bug factor, I think. This is because what retain a company is ultimately its customer and if the customers have good impression to a firm and use it more often, the firm will make big products. I think companies want to monopolize the good impression deriving from innovation. So, they choose competitive R&D, not R&D cooperation.

Second, that is about technique. I think R&D cooperation has the possibility of leak firms’ techniques. Of course, in R&D cooperation the firms won’t use the technique which they want to monopolize. But, some techniques have the possibility to make other companies invent new innovation. So, I think the monopolization of technique prevent firms from choosing R&D cooperation.

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XIEWEN YU
In my research of this topic, it shows that whether R&D cooperation or competition is depending on the level of spillover effects. In the early stage of study, three different ways had been investigated which include 1.companies competed with each other independently on the R&D investing and producing stage ,2. companies cooperated in R&D and competed on…
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In my research of this topic, it shows that whether R&D cooperation or competition is depending on the level of spillover effects.
In the early stage of study, three different ways had been investigated which include 1.companies competed with each other independently on the R&D investing and producing stage ,2. companies cooperated in R&D and competed on producing stages. 3. companies cooperated on both R&D and producing stages. Researchers get different outcomes from these three different ways. First of all, once the spillover level is more than 0.5 which is considered as a critical value, R&D cooperation made more profits that competition. The second result relevantly contrary to the first result if the spillover level is under 0.5. Finally, more spending on R&D if companies cooperated on both stages than only cooperated in R&D investment at the cost of much lower productivity.
In the later research on the same topic, researchers developed the R&D cooperation into not only coordinating the level of R&D investment but also undertaking all the cost of R&D needed. It turns out if companies keep competing with each other in R&D , the companies will
consider spillover effects at the same time and want to take advantages from others which results in bad effects in innovation and the whole market. If the companies worked and invested together in R&D, spillover will be largely overcome by the companies themselves. R&D investment will be maximized at the same time.
Just like the research, some real experiment also improved that if the level of spillover is high,the cooperation of R&D can increase technology innovation of the market effectively. Cassiman and Veugelers(2002) proved that by analyzing the real data of the manufacturing industry in Belgium. They also find that the size of the companies, the cost of R&D as well as the complementary between risk and technology have positive motivation for the R&D cooperation.
In conclusion, in the high level of spillover, cooperation of R&D has positive effects on businesses. however, neither cooperation nor competitions can eliminate all the innovation problems businesses meet. These solutions are all optimal method the markets can get. It still needs further research and further motivating innovation plan in the future.

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Lefebvre Jean-Christophe
In my point of view, it’s too simplistic to summarize the choice of cooperation or competition to the spillovers. First, because when spillovers are big, companies prefer not to share the cake and they begin a run for patent like we saw last week. Then, cause the context of innovations is more complex than R&D and spillovers. To begin, before…
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In my point of view, it’s too simplistic to summarize the choice of cooperation or competition to the spillovers. First, because when spillovers are big, companies prefer not to share the cake and they begin a run for patent like we saw last week. Then, cause the context of innovations is more complex than R&D and spillovers.

To begin, before the spillovers, it’s important to notice the costs. There is a risk in all research that we don’t find anything or that the spillovers aren’t the ones expected. So the choice of cooperation or competition will also depend of the perceived risk from companies. More the perceived risks more the cooperation probability.

Then the history of the market influences that choice too. For example, when Nintendo decided to invest in R&D about Wii and movement recognition, they could have cooperate with Sony but I think the competition between those companies was already too strong to even think about cooperation in R&D. The history between some companies makes cooperation almost impossible now. The culture of them is also a factor. The actual most relevant example is Phoneblock. The concept is to create a phone for which all companies work together. (https://phonebloks.com) This phone will be made of pieces from different firms. One of the biggest challenges for that, beside the technological aspect, is too make them cooperate.

Finally, the risk of perceiving the cooperation as collusion is also a factor that influences that choice. Indeed, when tow companies agree together on an innovation and his spillovers, it’s easy to fall in a collusion case which is illegal.

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Rubens Moura
The fundamental reasons that lead firms to engage in a R&D cooperative scheme were quite precise in the text. I would like to reinforce the argument by highlighting the crucial importance that the possible increase in the likelihood of finding innovation assumes in a particular context of patent racing. Some are the possible determinants which may bias the behavior of firms…
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The fundamental reasons that lead firms to engage in a R&D cooperative scheme were quite precise in the text. I would like to reinforce the argument by highlighting the crucial importance that the possible increase in the likelihood of finding innovation assumes in a particular context of patent racing.

Some are the possible determinants which may bias the behavior of firms toward a refusal in adoption of a jointly R&D strategy. I will list some of them below.

First, one can mention that establishing a cooperation relationship may imply that firms will also share some confidential information about their production system. In practical terms, let us take as example the case of two investment banks of the same country which were hired to perform a valuation analysis of a foreign company. In this circumstance, since both banks were working together, it would be expected that they would be required to share some of them precious information regarding issues such as valuation techniques, forecasting of future economic scenarios and so on.

Second, cooperation can lead to some coordination problems. For the purpose of illustration take the case of two cooperative firms that were successful in conceiving an innovation and were reward with a prize. Then… how to share it? 50% for each company or according to their effective contribution in the development of the research? If the last point is the case, then how to define the precise share of contribution provided by each one? What if they decide to opt for protecting the invention though a patent? What company will receive credit for what? Eventual disagreements on these issues might end up in court procedures, which can compromise the profitability of the first deal. Therefore, firms should be aware that such issues may arise in practice before deciding on cooperate.

Bearing in mind the appropriability issue, basic premise on studies of economics of innovative, the possible magnitude of spillover resultant from a cooperation mentioned on the blog’s text seems also to play an important role on companies’ decision.

Finally, I want to relativize the idea that cooperation may always promote probability of success of innovating sooner. Take simply the case on which there are two pharmaceutical companies researching on the treatment of a given disease and that in some moment they start to present divergent and excludable about the conduction path to be followed by the project. If we can imagine that from this moment on, there is only option that can be undertaken, then the most desirable solution from the point of view of the society would be to have the two companies running studies separately.

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Francesco Battino
Personally, I really liked the theory proposed by Mr. Ferrari and Ms. Jessica Goethals. But, like always in economy, the answer is more complex. I think the approach to the trade-off between competition and cooperation must always vary based on the characteristics of the firms competing or collaborating and to the characteristics of the market object of observation. To apply…
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Personally, I really liked the theory proposed by Mr. Ferrari and Ms. Jessica Goethals. But, like always in economy, the answer is more complex.

I think the approach to the trade-off between competition and cooperation must always vary based on the characteristics of the firms competing or collaborating and to the characteristics of the market object of observation.

To apply the method proposed by Mr. Ferrari, the firms need a lot of investments in R&D, because you need to create different R&D teams in the same firms, and then let them compete with regular comparison between the result of the group.

The requirements of competing teams, which must come from different divisions, and which have to take different approaches to the same problem, cannot always be accomplished. First of all, it’s not always possible to obtain different approaches to the same problem. It can be true for art, design, even for chemistry, but for example in construction engineering there are some “fixed path” that cannot be bypassed without breakthrough in other science, in the example chemistry of material.

Another important cost of this type of competition is the cost in management control. Like the authors point out, a poorly managed competition can grow out of scale, becoming dangerous.

Another practical issue, which can be translated in increased cost, is the change in the culture of the company, which must become a “culture of cooperation and collective achievement”, while normally in R&D people search for personal benefits. Even if the company succeeds in implanting the new culture, the attention must be constantly high to avoid the rising of opportunistic behaviors. In the end, creating a culture of innovation based on cooperation and collective achievement is easier said than done and is not always possible in reality.

It’s true that, with this strategy, it is possible to focus on the discovery of a specific new innovation, raising the probability to find a solution, but focusing too much on a single direction narrows the path of the research. This can be translated in opportunity costs deriving from choosing to focus the work of different teams only on one subject rather than working on different ones.

Another problem, last but not least, is that the discovery of a new innovation is based on a given. The nature of the “paragone” is asking to two or more artist to compete in the creation of a statue or of a painting. This assumption give the solution to the problem as sure. If you ask the artist to do different painting in a given time, they will do them, obtaining different result which you can compare. In the R&D field you are not always sure to have results to compare with the others on a given date, even if you have obtained all the other conditions before explained.

In conclusion, I think that before choosing which kind of approach we should use to solve this trade off, we should see what lies behind the surface and study the entire structure of the companies and markets we are considering. I think this is the only way to make the right decision, or at least a logic one, in this complex trade-off.

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Mariame Ammour
I agree with Claude d’Aspremont and Alexis Jacquemin on the fact that the R&D “strategy” depends on the degree of R&D spillovers. Indeed, as said in the article high spillovers lead to less competition and so encourage coopetition. Another aspect that we can take into account is the competitiveness of the sector. Sectors with high competition (so where there are several…
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I agree with Claude d’Aspremont and Alexis Jacquemin on the fact that the R&D “strategy” depends on the degree of R&D spillovers. Indeed, as said in the article high spillovers lead to less competition and so encourage coopetition.

Another aspect that we can take into account is the competitiveness of the sector. Sectors with high competition (so where there are several new products in a relatively short period or a lot substitutes for product) we will preconize R&D competition because they have to fight for a competitive advantage. And for sectors which need larger investments (products or services that need more time, needs subsidiaries or where demand is not specific) we will favor coopetition.

Coopetition pros (competition cons):
First of all in coopetition we focus only on the objective, so we don’t spend energy to try to beat the opponent. In addition, in competition all the concurrent use the same resources but only one will win thus the losers have wasted resources. We can turn the argument to say that coopetition allow to share the cost and the risks of the R&D. Finally coopetition minimize the free-riders issue and raises the social welfare.

Competition pros (cooperation cons):
Competition stimulates innovation. Then, in the coopetition R&D, there is maybe a problem representing by the prisoner’s dilemma. Indeed, the concept of the prisoner’s dilemma states that the profit in cooperation is higher than the expected profit, but the individual profit (so in competition) is higher than the coopetition profit. So for coopetition we need a solid confidence relationship. Finally, coopetition can lead to collusions between the companies. So we need a strengthened control to avoid deviances.

To conclude both coopetition and competition are efficient in their adequate circumstances. Maybe there might be an optimal level of R&D cooperation and competition in an industry. It’s difficult to say that one is better than the other one because we have to take into account a lot of elements.

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Hexin Shi
Generally speaking, if spillovers are large enough, R&D cooperation have a positive effect on R&D activities. If spillovers are small, R&D competition have a positive effect. So if we talk about R&D competition or cooperation, we should pay attention to the circumstances (i.e.,target market, market structure) and the degree of R&D spillovers. First of all, R&D cooperation means two or…
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Generally speaking, if spillovers are large enough, R&D cooperation have a positive effect on R&D activities. If spillovers are small, R&D competition have a positive effect. So if we talk about R&D competition or cooperation, we should pay attention to the circumstances (i.e.,target market, market structure) and the degree of R&D spillovers.

First of all, R&D cooperation means two or more enterprises through the contract form technology alliance and get all the required knowledge.Why firms want to R&D cooperation? First ,they want to gain more market share and widen scope of the market. Second, they can reduce the burden of the R&D cost of each firms, sharing cost with other firms.As a result ,cooperation leads to larger investments in R&D and benefits society and consumers. But all of this happen under environment that spillovers are large enough.

Secondly, if spillovers are really small, every firms just keep secret, then they have strong incentive to invest R&D and compete with each other through the investment of R&D. If a firm get a innovation from investing R&D, then he will get monopoly profits and occupy a strong market power. But only one firm will get innovation through R&D competition, it lead to waste of R&D cost of other firms. So it is not very good for society and consumers, but good for inventors and firms.

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Georges Cyprien
As usual in economics, there isn't a single good way to answer this trade-off. As said in the article, R&D spillovers seems to be the key factor, but I think there is something else which might be very important in the decision to cooperate or not : the risk. In fact, behind every research, there's quite a big risk it…
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As usual in economics, there isn’t a single good way to answer this trade-off. As said in the article, R&D spillovers seems to be the key factor, but I think there is something else which might be very important in the decision to cooperate or not : the risk. In fact, behind every research, there’s quite a big risk it won’t end up with a concrete result. Considering this, you may argue that cooperation reduces the risk quite a lot (you can afford yourself to loose money if you can split the risk between firms), which could allow firms to try more risky, but potentially more interesting research leading to more drastic innovations which would have a way huger impact on the economy than a few non-drastic innovations.
You can also argue that there are some investments that definitely need big firms to be made. Think for instance of mobile phone network development: a few big firms will be way more efficient and socially desirable then a lot of little firms. In fact, they wouldn’t have the necessary means to develop what is needed.
Of course, there’s also the argument of the incentives. You could expect big firms with big market shares not to be wanting to invest, even though they would be able to. On the other side, the more the firms on the market, the more they will want to invest in R&D in order to get as much demand as possible and become leader on the market.
Knowing all of this, you can also think about the influence of the structure on the willingness to cooperate of the firms. But it’s still very hard to assess the R&D level when firms cooperate and when firms compete. It depends on the complementarity of the R&D.
Actually, this is nearly the same situation than considering if a concentrated market is socially desirable or not. Some mergers are allowed or not based on these R&D effects.

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Miguel Moreira
I believe this is a very interesting question, to which there isn't an obvious answer. There are a lot of factors to consider when it comes about choosing between competition or cooperation in R&D matters. First of all we have to put things in context according to the market that we are talking about. Considering only the possibility of cooperations…
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I believe this is a very interesting question, to which there isn’t an obvious answer. There are a lot of factors to consider when it comes about choosing between competition or cooperation in R&D matters. First of all we have to put things in context according to the market that we are talking about. Considering only the possibility of cooperations between two companies of the same market/industry, for example if we consider the smartphone industry (more in terms of software and functionality, not the physical aspect of the devices) the idea of cooperation seems completely misplaced, since Apple and Samsung (for example) wouldn’t both benefitiate if they cooperated because their products would offer the same level of technology, losing their differentiating aspect which gives them the edge one over the other. Even society benefits from a competition in R&D between these firms since all the products offer some different characteristics, and the consumer can choose the one that pleases him the most.
On the other hand if we think about another kind of business where two companies can both get benefits from the same innovation, they have an incentive to cooperate since they can split costs and increase the chance of success. We can think of for example two companies who seek a less expensive and more ecological way of treat their leftovers, if we consider that their core activity isn’t largely affected by their expenses in this area they will both gain from this partnership and so will the environment, and consequently, society.
Another important factor to consider is the dimension of the innovation and the associated costs, since it’s more likely that companies are more willing to colaborate when the costs are higher, as a way to split the risk.

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Eva Leclercq
I think that we can’t be in all cases in favor of R&D cooperation or of R&D competition, they both can be the best option in different situations. Lots of elements determine whether a firm should cooperate or compete. First of all, I think that this choice can depend on the opportunities of partnership a company has in its environment.…
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I think that we can’t be in all cases in favor of R&D cooperation or of R&D competition, they both can be the best option in different situations. Lots of elements determine whether a firm should cooperate or compete.

First of all, I think that this choice can depend on the opportunities of partnership a company has in its environment. In facts, some firms may not have the chance to find a partner with the same objectives and the same capability to invest. Moreover the distance between two potential collaborative firms can make the venture less advantageous. The cultural and corporate differences may also hinder the collaboration. Given these points, working with another firm can be more difficult than previously imagined. In fact, a joint project asks more dexterity and flexibility than a project lead by a unique firm. An effective communication strategy and an adequate approach should be set up to insure a perfect circulation of the information and a successful ptoject. R&D collaboration is a progressive and slow process: firms start with a small project and then enlarge gradually the scope of the collaboration. In fact, companies must build mutual trust and pay attention not to rely too heavily on one collaborator in order to protect its independence.

Then, the sector in which the company is active plays an important role. It is true that R&D costs in some fields can be extremely high and requires important investments. It may indeed be safer to pool the risks and to share the burden of such an operation. This kind of joint venture may also allow firms to allocate their internal resources on more strategic tasks in product development.

Finally, collaboration becomes increasingly used in large international enterprises and it exists many different types of R&D collaboration. Even if managers need to be cautious about this matter, it can be relevant to opt for this alternative.

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Edward Still
As mentioned in Belleflamme’s article above, one of the key variables affecting the choice between R&D cooperation or competition is the level of spillovers. There are several other factors that must also be taken into account such as the competition context, market power and firm size, the cost of innovation and even the level of subsidies. These are the first…
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As mentioned in Belleflamme’s article above, one of the key variables affecting the choice between R&D cooperation or competition is the level of spillovers. There are several other factors that must also be taken into account such as the competition context, market power and firm size, the cost of innovation and even the level of subsidies. These are the first factors that spring to mind and that could influence the choice between cooperation or competition but are by no means the only ones.

Firms will behave differently if they compete in terms of quantity or in terms of price. Under quantity competition, if spillovers are large then an increase in the R&D of a firm will have a negative effect on its profits whereas such an increase will have a positive effect on its profits if spillovers are small. On the other hand, if firms are competing in terms of price then the effect of an increase in R&D will always be negative (1).
As for market power, firms will behave differently if they are a leader or a small player on the market. A market leader with great resources will be reluctant to form a cooperation with a smaller player with smaller resources as it will in all likelihood have little to gain from such a cooperation (2). The argument is similar in regards to the cost of innovation; small firms with limited spending power will struggle if the cost of innovation is high and will therefore look to enter a R&D partnership so as not to fall behind competitors and to alleviate financial difficulties. The powerful firms with important financial clout will be able to go alone and invest in R&D even if the cost of it is high therefore excluding the need to form a partnership.
The state or local governments can also play an important role in deciding whether partnerships will be formed or not; if they set a high level of subsidies to cover R&D costs then firms won’t necessarily look to cooperate as quickly than in the case of no subsidies being distributed.

So the context of competition, market power and the cost of innovation are the three main factors that stand out in my eyes on top of the level of spillovers. Another factor could be the level of potential synergies must also be a contributing factor; if firms had the opportunity to create important synergies by cooperating in the sense that they would complement each other in regards to their respective capabilities and capacities then they will be more inclined to develop a partnership (3).

(1) P.BELLEFLAMME, 2010, p.495
(2) C.FRANCO & M.GUSSONI, 2010,p.8
(3) H.DAWID & P.M.KORT & M.KOPEL, 2013, p.16

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Guillaume d'Oreye
Both competition and cooperation are good for the society. Competition creates jobs and encourages innovation. Cooperation aims the social welfare. Depending on the situation we are in the first or second case. Let's take the example of the pharmaceutical sector. In this sector there is a harsh competition because companies are often running to be the first to come out with…
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Both competition and cooperation are good for the society. Competition creates jobs and encourages innovation. Cooperation aims the social welfare. Depending on the situation we are in the first or second case.

Let’s take the example of the pharmaceutical sector. In this sector there is a harsh competition because companies are often running to be the first to come out with a new drug and to be second is a drama as you waste a lot of money. If a company wants to survive then it must be productive and efficient. So generally this sector is in competition because there is no incentive for cooperation. But I remember a case of cooperation.

In 2009 the World Health Organization declared the virus Influenza A(H1N1) pandemic which means that the virus had the ability to spread around the world very quickly. So governments asked pharmaceutical companies to find as soon as possible a vaccine to stop it. At least GSK, Novartis, Sanofi, Baxter int worked on it. After 3 months a mock-up vaccine was ready and after 6 months a real one was commercialised. Of course money was the incentive as most of the costs were beared by governments but it shows that it’s possible to create a drug very quickly with cooperation.

So in conclusion, I think states should work together to set in place a common legislation which would encourage companies to work together, to increase cooperation. It would probably reduce the costs and increase the social welfare.

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Valentine Lowagie
I think that the number of firms on the market can influence the choice between cooperation and competition in R&D. Let’s consider a competitive market (lot of firms) and a duopoly. Firms in a competitive market have fewer resources than firms in a duopoly, which may encourage them to invest cooperatively in R&D. They could indeed share their resources (financial as…
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I think that the number of firms on the market can influence the choice between cooperation and competition in R&D. Let’s consider a competitive market (lot of firms) and a duopoly.

Firms in a competitive market have fewer resources than firms in a duopoly, which may encourage them to invest cooperatively in R&D. They could indeed share their resources (financial as well as material) and also their know-how. This could allow them to develop an invention that couldn’t have been developed in a situation of rivalry in R&D, which could then make all firms better off than if the invention wasn’t developed. In the duopoly case, firms don’t have the sharing of resources’ incentive because they enjoy positive profits and thus financial resources. They also have more material and intellectual resources because of their larger size.

We can here find again the debate that opposed Shumpeter and Arrow, about the most R&D conducive market structure. Shumpeter is a pro monopolies because of their capacities to innovate, while Arrow is more favorable to perfect competition because of the incentives to innovate that competitive firms have. Monopolies, or rather duopolies in this case, have the capacities to invest in R&D, which means that they may be more favorable to non cooperative R&D. Competitive firms have the incentives to innovate but not always the capacities, which means that they may be more favorable to cooperative R&D.

However, there may be more incentives to invest non cooperatively in R&D in the competitive market than in the duopoly. Indeed, there is probably more to be gained by investing non cooperatively in R&D (compared to cooperatively) when there are a lot of firms on the market because there is a possibility to considerably increase its profits, from zero (perfectly competitive case) to monopoly profits. In fact, if the innovation succeeds, the firm that has developed it could patent it and thus enjoy a temporary monopoly position. In the duopoly case, firms start with positive profits and thus have less incentive to invest non cooperatively in R&D in order to be the first to invent. The difference in profits between the initial situation (no R&D investment) and the one when firms invest non cooperatively and succeed in their innovation is greater in the competitive case than in the duopoly case. This difference in profits measures the incentive to invest non cooperatively in R&D.

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Aneta Spychalska
I think that the choice between cooperation or competition in R&D depends also on the type of industry but not so much of a company size. Some industries often cooperate between them. In particularly in pharmaceutical sector when R&D are important and when profits from investments take long time, sometimes several years. When risks are important, this is beneficial because…
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I think that the choice between cooperation or competition in R&D depends also on the type of industry but not so much of a company size.
Some industries often cooperate between them. In particularly in pharmaceutical sector when R&D are important and when profits from investments take long time, sometimes several years. When risks are important, this is beneficial because this allow share the costs, allow better results by focusing mainly for a specific purpose and partly avoids errors.
In a broader view, cooperation is largely promoted between firms. When we think about clusters for example, this is very advantageous for firms because there create positives externalities by working together and exchange skills and knowledge.
Competition also has good sides and it’s difficult to choose between the first or second proposition. Certainly, competition stimulates innovation because firms want to be the winner and first find the best technology or invention to become the monopoly or the leader. Competition has goods points because this create several ideas, technologies, expertise and this is exactly this diversity which is creator of wealth.
According me, this not depend on the size of a company because there no exist a particular size to cooperate or to compete. In reality, companies cooperate both when have big or small size, pharmaceutical companies cooperate because innovation in this sector is complex and costly, and small businesses cooperate because want to gain market share quickly and avoid research costs too important since the beginning of their business activity. Competition too, exists in both, large and small companies. But a competitive behavior maybe more maintained in a competitive environment where firms compete all together and try exceed other and eliminate them of the market.
Why this is difficult to choose the best recipe, it is better to look case by case, the type of industry and expectations (spillovers), the company’s characteristics and its values.

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De Bont Eloïse
Intuitively, I would say that I'm in favour of the cooperation. In order to write this comment, I have done different researches on Internet. Theoretically, it has been shown that there is always a form of cooperation that provides a greater benefit than the one of non-cooperation. But the problem with the theory is that it assumes that the companies…
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Intuitively, I would say that I’m in favour of the cooperation. In order to write this comment, I have done different researches on Internet. Theoretically, it has been shown that there is always a form of cooperation that provides a greater benefit than the one of non-cooperation. But the problem with the theory is that it assumes that the companies are all non-opportunistic. Using this assumption generates two main implications. Firstly, one of the fundamental problem of the implementation of cooperation in R&D, the one of the selection of partners, is not taking in account. Secondly, the fact that a companies could make a cooperation in R&D in order to seize the R&D partners’ results while minimizing their own contribution is also not taking in account.

If we try to cope better with the reality and so, if we assume that a company can have a opportunistic way of acting, it has been shown that the trust is one of the key success of the cooperation in R&D. The emergence of this trust in the cooperation in R&D depends on the structure of the market through the level of technological externalities. More technological knowledge can be appropriated by the partner firm, the harder it is to trust each other and therefore, to support cooperation in R&D. Moreover, it is easier to stabilize the cooperation in R&D by using a joint venture in R&D. The creation of a joint venture led firms to endogenise the degree of spillovers since they partially control the transfer ot their technological knowledge. Cooperation is therefore more robust.

To sum up, I would like to add that I find very sad that only because companies can’t always trust each other, they are not able to build cooperation.

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Marina Dinkova
Thе incrеаsing prеssurе on firms to invеst in innovаtion hаs lеd to product divеrsificаtion аnd morе complеx tеchnologiеs, but on thе othеr hаnd it hаs аlso incrеаsеd costs аnd risks for innovаtors so thаt thеsе cаn hаrdly bе dеаlt аlonе. Аs а rеsult R&D аlliаncеs hаvе bеcomе bеnеficiаl businеss аctivity. Thеsе bеnеfits аrе vеry divеrsifiеd аnd mаy consist of…
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Thе incrеаsing prеssurе on firms to invеst in innovаtion hаs lеd to product divеrsificаtion аnd morе complеx tеchnologiеs, but on thе othеr hаnd it hаs аlso incrеаsеd costs аnd risks for innovаtors so thаt thеsе cаn hаrdly bе dеаlt аlonе. Аs а rеsult R&D аlliаncеs hаvе bеcomе bеnеficiаl businеss аctivity. Thеsе bеnеfits аrе vеry divеrsifiеd аnd mаy consist of shаring R&D costs, аccеss to nеw tеchnologiеs аnd mаrkеts, pooling rеsourcеs, rеducing timе for dеvеloping аnd commеrciаlizing nеw products, еtc. In othеr words, coopеrаtion with compеtitors (if it is succеssful) is bеnеficiаl аs it rеsults in product improvеmеnts, cost rеductions аnd highеr profits.

Аt thе sаmе timе, mаny R&D аlliаncеs show high fаilurе rаtеs, which impliеs thаt co-opеrаtion аlso comеs аt а cost, such аs outflow of еssеntiаl аnd sеcrеt informаtion, loss of control or ownеrship, conflict аrising from diffеrеnt goаls аnd objеctivеs, аnd so on. Thе costs of co-opеrаtion mаy bе viеwеd in two nеgаtivе dirеctions. First, pаrtnеrs bеhаvе opportunisticаlly аnd this mаy lеаds to morе uncеrtаinty аnd risk. Sеcond, trаnsаction costs likе nеgotiаtion- аnd contrаct costs аrisе.

Аlthough thаt coopеrаtion mаy sееm аs “аttrаctivе” opportunity for thе firms, thеrе аrе limits аnd drаwbаcks thаt firms cаnnot ignorе whеn thеy wаnt to еngаgе in аn R&D pаrtnеrship. Еаch firm should mеаsurе thе risk bеforе еngаging in coopеrаtion.

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Ricardo Pereira Gomes
The distinction between innovation with high degree of spillover or low degree of spillover is very pertinent because this factor impact the strategy of firms on their decisions to invest or not. This allows us to make distinction between different type of innovation. Knowing if cooperation or competition is more efficient we need to distinguish different type of innovation and…
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The distinction between innovation with high degree of spillover or low degree of spillover is very pertinent because this factor impact the strategy of firms on their decisions to invest or not. This allows us to make distinction between different type of innovation. Knowing if cooperation or competition is more efficient we need to distinguish different type of innovation and spillover is a good starting point.

In my opinion an other factor that could impact the argument for cooperation or competition is the cost of the innovation. Indeed, even if the spillover are large, if the profit derived by the innovation is larger than negative impact (spillover and cost) thus firm would have more incentive to innovate with competition rather than cooperation.If, at the contrary, costs are too high, cooperation would be better off competition because the cost would discourage firm’s investment or create huge investment leading to heavy losses because of duplication effort.

If the cost of R&D is too low, cooperation would lead to underinvest. Indeed firms would have lower incentive to innovate quickly because they invest together and thus they don’t pushed to find before the other. If they compete in R&D, both would find the process first. the investments would be higher and quickly than in cooperation.

To conclude, we need to take into account the size of the innovation. When it is a very big innovation, we need to cooperate to increase the opportunity to succeed. But in the case of little innovation, the competition in R&D would be more efficient.

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Anne-Cécile Annet
I think that in some cases, the cooperation in R & D can be a good thing. In fact, it can help the companies to share the risks and the technology costs, capitalize the knowledge, find additional information, skills to develop a technology, extend the expertise of the company, benefit of new sills and networks. However, some situations in the…
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I think that in some cases, the cooperation in R & D can be a good thing. In fact, it can help the companies to share the risks and the technology costs, capitalize the knowledge, find additional information, skills to develop a technology, extend the expertise of the company, benefit of new sills and networks. However, some situations in the companies are more appropriate for the R&D cooperation than others.

Cooperation in R & D requires significant resources. Therefore , we might think that large companies cooperate more likely than small firms , technical , human and financial resources devoted to R & D are often more important and more readily available in larger companies. However, small businesses can also consider cooperation in R & D to share the financial risks associated with innovation activity and access to technology skills they do not have.

A second point is the cost aspect. Transaction costs related to cooperation in R & D are not overlooked. When companies have similar cultures and operations, these costs will be lower, so it is a positive point for cooperation in R&D. By cons, if the partners are of different nationalities, the company must consider if it really worth it to invest in collaborative R & D because it will be more expensive. Cooperation lowers the costs not only for each firm but also for its associated competitors, making them more aggressive and thus penalizing cooperation in R&D. So in deciding whether to cooperate, firms must weigh the costs against the benefits.

As a conslusion, if the adaptation of external resources is cheaper than inhouse R&D, cooperative arrangements in R & D are an efficient way to improve and optimize the innovation activities in the companies with positive effects on research efficiency, profitability and ability to compete.

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Alexis Winders
The type of industry plays probably a major role in the decision and the amount of R&D. If competition is very high, many firms will probably try to free ride the investment and the innovation of the first company to invest. The question will then be: is there any first-mover advantage? Of course, it depends of the number of firms on…
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The type of industry plays probably a major role in the decision and the amount of R&D.

If competition is very high, many firms will probably try to free ride the investment and the innovation of the first company to invest. The question will then be: is there any first-mover advantage? Of course, it depends of the number of firms on the market, the complexity of the innovation, etc.

Such an industry could be the smartphone industry. So far, Apple has made major investments and innovations despite a huge competition. However, we can also say that it created a new market with the iPhone. In the end, lots of firms developed their own smartphones with or without success. But thanks to its innovations, Apple enjoyed and is still enjoying a first-mover advantage as it has created a very good reputation and even a real fan-community.

Of course, some competitors like Samsung consolidated an important position in the market despite the fact it has not invented nor innovated something that made a revolution in the electronics industry. We can also point out the fact the Korean company has broken some patents…

This example shows probably that, like the author says, there is no clear-cut economic answer. For such risky investments, it might be interesting to open your doors to other firms. Nevertheless, Apple has always succeeded to perform well by staying very secret, discrete and even closed to other companies.

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Ludovic Verbeke
The lesson that you mention in your article is, I think, a good summary of this issue. Indeed the decision for a firm to invest in R&D depends mainly on the spillovers. Firstly, a company will invest in R&D if it expects that its future incomes will outdo the R&D expenditures which are, in fact, fixed cost. But future incomes are…
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The lesson that you mention in your article is, I think, a good summary of this issue. Indeed the decision for a firm to invest in R&D depends mainly on the spillovers.

Firstly, a company will invest in R&D if it expects that its future incomes will outdo the R&D expenditures which are, in fact, fixed cost. But future incomes are difficult to estimate and it exists a lot of factors which will disrupt the appropriation of those revenues. For instance, free-riding that you mention in your article or the fact that some innovation are public good.

Secondly when firms are in competition in R&D it conducts to some negative consequences like duplication of efforts, excessive investing, the temptation to free-ride which leads to underinvestment …etc

Thus it’s why I think that R&D cooperation permits companies to regulate those issues and to share the costs and the risk of a R&D process. Moreover, by searching on the internet about the opinion of the authorities on this subject I discovered that these instances encourage the pool of R&D investment. I guess it’s not surprising because I think that they believe it will lead to an uprising of the welfare when firms pool R&D activities.

However I was wondering if this cooperation could conduct to an increase of collusion’s temptation because in order to pool R&D activities, firms have to share some information and could extend this cooperation to the product which are commercialized. And this case, how the European Commission will control it?

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Arnaud De Visscher
I think that R&D cooperation should depend on the sector in which it happens. For instance, cooperation in the pharmaceutical sector is interesting because who more R&D is spent in it, who better the results could be. The consequence of such an action could be seen in long term by a reduction of incurable diseases or at least, shorten the…
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I think that R&D cooperation should depend on the sector in which it happens. For instance, cooperation in the pharmaceutical sector is interesting because who more R&D is spent in it, who better the results could be. The consequence of such an action could be seen in long term by a reduction of incurable diseases or at least, shorten the period of sickness. Actually we could even go further by assuming the less sick people the higher the economic productivity (but it is perhaps too much of speculation).Although there is a real social welfare at stake, I’m aware that cooperation in this particular example is hard because it’s the target of a lot patents.

On the contrary, competition should be kept in sector where the demand is completely subjective. For instance, there are benefits for customers to maintain competition in the mobile phone sector. A lambda person might be interest in a high resolution camera while an alpha person might be looking for a high autonomy battery. Those two characteristics required different R&D developments. But in case of cooperation, I fear a lack of diversity in the R&D development. Two companies working together, in order to minimize the risks, could focus on a technology that may be hype for a period but isn’t really relevant.

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Shashank Rai Goel
The battleground for gaining competitive advantage has evolved many times over the years. What earlier started out as a race to gain Positional Advantage (between products), gradually transformed into a race to gain Capabilities Based Advantage (between firms). In recent times, the battle-lines have been been redrawn and the competition is now between ecosystems. In my view, each firm today…
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The battleground for gaining competitive advantage has evolved many times over the years. What earlier started out as a race to gain Positional Advantage (between products), gradually transformed into a race to gain Capabilities Based Advantage (between firms). In recent times, the battle-lines have been been redrawn and the competition is now between ecosystems. In my view, each firm today is trying to establish its own ecosystem, with a constellation of companies around itself, while the firm itself acts as a keystone player. In such a scenario, cooperative R&D gains a lot more significance.

As more and more firms collaborate to create an ecosystem in which all of them mutually benefit, it is only natural that these firms will pool their resources to innovate and gain competitive advantage over other firms. So while, in essence, firms are still engaging in competitive R&D, they are cooperating within their network at the same time.

Engaging in cooperative R&D requires a lot of trust between partners. Moreover, while cooperative R&D reduces the risk for the firms, all the partners must be ready to face the fact that the rewards of the innovation may not be shared equally as some firms will undoubtedly gain from the innovation than others. Hence, I believe, that long term cooperation in R&D may not be possible as the temptation to gain more reward will ultimately affect the partnership between firms. Here the advantage of having one’s own ecosystem comes in. As a network of companies that mutually benefit from each other’s progress, the temptation to dominate the network reduces and firms can more effectively utilize their resources through cooperative R&D

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Rachit Khare
I agree with the theory of Claude d’Aspremont and Alexis Jacquemin that when knowledge spillovers are high cooperative R&D will lead to higher R&D investment than competitive R&D. According to me, besides spillovers there is another factor that affect the R&D investment in each of the mentioned scenarios. It is the type of industry. The industry where competition is high…
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I agree with the theory of Claude d’Aspremont and Alexis Jacquemin that when knowledge spillovers are high cooperative R&D will lead to higher R&D investment than competitive R&D.
According to me, besides spillovers there is another factor that affect the R&D investment in each of the mentioned scenarios. It is the type of industry. The industry where competition is high and firms come up with the new products very often usually favors competitive R&D. So, industries like mobile, software and consumer electronics where there is cut throat competition and the product life cycle is low firms try to invest more and more in R&D to maintain their market share. At the same time, industries where product life cycle is high such as automotive, capital goods and aviation we see a lot of firms going for cooperative R&D to minimize risks due to the large investments.
I personally believe cooperative R&D is better than competitive R&D as far as the overall welfare of the society is concerned. In competitive R&D there might be a possibility that two firms end up developing the same technology. This is not the efficient use of resources if we see the market as one ecosystem. Such redundancy is avoided in cooperative R&D. Further, the results of cooperative R&D may be better as the firms is cooperation work in the areas of their core strength. For example, in semiconductors industry two firms cooperate to produce a new technology, the firm which is good in analog can work in that field while the one which is good in digital can work in the digital domain. Thus, two firms working in domains of their core competence strive for the common goal. Clearly, cooperative R&D leads to better and effective utilization of resources.

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Hippolyte Dispa
R&D competition and cooperation both have their pros and cons and can be used to maximize social welfare depending of the market strucutre. As explained by Claude d’Aspremont and Alexis Jacquemin in the American Economic Review, this is mostly due to the level of spillovers that are present on a given market. Some recent example such as the fast development…
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R&D competition and cooperation both have their pros and cons and can be used to maximize social welfare depending of the market strucutre. As explained by Claude d’Aspremont and Alexis Jacquemin in the American Economic Review, this is mostly due to the level of spillovers that are present on a given market. Some recent example such as the fast development of social media websites or companies such as Nokia and Ericson (as shown on this post from December 2012: https://www.ipdigit.eu/2012/12/commercialization-strategies-for-start-ups-examples/) are the proofs that knowledge spillovers are increasing drastically and that geographical distance is not such a major obstacle. These reasons have led me to believe that inter-organizational cooperation spurs innovation even more than competition on markets that present particular characteristics. For example, on emerging market, such as smartphones once were, where R&D can help the different actors at these first steps of product development where researchers/scientists are exploring any possible path, trying to draw the first drafts of what the final form of the product or the service will be like. They do not have yet the resources to conduct R&D nor the structure to support the costs induced. Cooperation will allow them to split costs and develop while still leaving room for differentiation afterwards.
Another example that comes to mind is the initiative launched by major actors of the food retailing market such as Danone, Unilever, Nestlé or Coca-Cola. These international firms are joining forces in order to create a common method that will be used to evaluate the social and environmental performance of suppliers and by that raising the standards of the industry. It is slightly different from pure innovation but it is still a good example of what inter-organizational cooperation can bring.
Another form of cooperation that I believe to be even more effective is when firms from non-competing markets share technologies or work hand-in-hand to create innovative products. One obvious example, as I am using it on a weekly basis, is the joined initiative by Nike and Apple to combine running shoes and electronic measuring technology. They did not reinvent the wheel but they brought together a product that did not exist before. They cooperated and decided to launch the product together and share benefits somehow instead of spending years trying to develop it themselves.

Sources:
http://www.unilever.com/images/Unilever%20Responsible%20and%20Sustainable%20sourcing_tcm13-265398.pdf
Cooperative and Noncooperative R & D in Duopoly with Spillovers, Claude D’Aspremont and Alexis Jacquemin, The American Economic Review, Vol. 78, No. 5 (Dec., 1988), pp. 1133-1137

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Justine Costeur
I’d say that two main determinants to choose between R&D cooperation and competition are the size and the activity of the company. On one hand, for big companies, working on innovation on their own seems appealing. First, they are likely to have enough funds and employees to work on it unlike small firms, then it could be difficult for them to…
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I’d say that two main determinants to choose between R&D cooperation and competition are the size and the activity of the company.

On one hand, for big companies, working on innovation on their own seems appealing. First, they are likely to have enough funds and employees to work on it unlike small firms, then it could be difficult for them to give up their position in the market or share it with a competitor. In fact, I think it’s not surprising that the director of General Electric’s Global Research Group said that rivalry has made a difference in his company’s efforts to develop better aircraft engines, composite materials, and power generation equipment (1). The fear of losing their leader position might have pressured employees to find new ideas and stay ahead of their competitors. Moreover, big firms may think of R&D cooperation as a problems and misunderstandings thing if it’s not well established in the beginning. It can be in fact hard to determine how the future profits will be distributed, as well as determining who has which rights on the product. What if one company brought more efforts in the innovation process…?

One the other hand, R&D cooperation may be better for small companies which have not a lot to invest in R&D and/or not enough innovators working for the company. In this case, its advantages overcome its drawbacks. In fact, not only does it mean sharing knowledge and more funds invested in one area, but it also enables small companies to carry less risk and maybe obtain notoriety if the goal is realized. At the end, innovations can be created more easily, and if R&D costs are shared between several companies, the final price of the innovation may even be more affordable than if it would have been if the product was created by only one company.

To sum up, as said in the article above, there is no clear answer at the question what is best between R&D cooperation and competition. To my mind, it depends on the size and the activity of the company. As regard to the size, it’s understandable that a big company is reluctant to share its knowledge and finally an innovation and the profit that follows with a competitor if it could have created it on its own. On the contrary, I think that R&D cooperation is a very good thing for startups; small and new companies that need to be pushed and helped to unlock their potential.

Then, the fact of choosing between R&D cooperation and competition also depends on the fields. For example, in the technological industry; competition is needed in order to stay on top, leader in the innovation race, whereas in the pharmaceutical field, mentioned last week, what matters the most is the well-being of the population and as it requires a lot of funds to innovate too, cooperation in R&D appears to be a good way to move fast in the field.

(1) B. T. Ferrari and J. Goethals (2010), Using rivalry to spur innovation, Mckinsey&Compagny.

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Lancelot d'Aubreby
At first glance, it seems logical that cooperation on R&D should be the best option. Indeed, in a competition framework like the race of patents, only the first company that files the patent wins. There is a deadweight loss for all the other companies that have invested money on R&D but get nothing at the end. Contrary to competition, the…
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At first glance, it seems logical that cooperation on R&D should be the best option. Indeed, in a competition framework like the race of patents, only the first company that files the patent wins. There is a deadweight loss for all the other companies that have invested money on R&D but get nothing at the end. Contrary to competition, the coordination framework allows a more efficient allocation of R&D and thus a decrease in the cost of production, an increase in the production and hence a decrease in price. So, both the consumers (decrease in price) and the producers (decrease in cost of production) are winners.

However, the situation analyzed as a prisoner’s dilemma shows that 2 cooperating firms have an incentive to deviate. Also, firms want to grab as much possible knowledge of other cooperating firms while themselves try to minimize their contribution. So, coordination on R&D is not as perfect as it looks like. The only way to avoid cooperating firms to deviate from their R&D agreements is to involve further cooperation. This obliges companies to respect their agreements because otherwise they would suffer from bad reputation while negotiating future R&D agreements. A good solution which implies long term cooperation is setting up between the actors a common laboratory of Research, which is more binding than simple R&D agreements.

Hence, regarding the incentives, I think that cooperation is only sustainable on a long term basis while competition should be preferred on a short term basis.

http://sites.uclouvain.be/econ/DP/REL/2007013.pdf

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Alexia Biglia
First when we speak about cooperation between two firms it directly make me think of two firms who are colluding. In Industrial Organization course we saw he theory of collusion and I think we can make a parallel with cooperation in R&D between two firms. But it's important not to forget that collusion is forbidden. Firms who take part in…
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First when we speak about cooperation between two firms it directly make me think of two firms who are colluding. In Industrial Organization course we saw he theory of collusion and I think we can make a parallel with cooperation in R&D between two firms.
But it’s important not to forget that collusion is forbidden. Firms who take part in a collusion get a higher profit but it’s not good for the whole society. If we are in an oligopoly firms might have incentive to collude because they will have a strong market power compare to the others competitors who are staying outside the collusion but if we are in a situation of an industry with a lot of competitors firms might be willing to deviate because they will get a higher profit outside the collusion. We might think that this principle is the same with cooperation between several firms.
Second I think that cooperate in R&D is a good thing. When firms compete they both start their R&D from the beginning, it means from nothing. There are strong chances that they might have some result in common. If two firms have the same results in pointless. When they cooperate there is no problem of obtaining the same result than the competitors because you act like one and only firm.
But we have to keep in mind that competition stimulate innovation and R&D because firms wanted to be the first to find something new and to sell it in order to get a high profit.
So I think that two firms who are cooperating is not a good thing.

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Labye Stéphane
For this comment, I would like to speak about concepts that I learned during an industrial organization course. Actually, when I read the word "cooperation" in an economic field, it immediately reminds me the game theory and I think we can make a kind of parallel between the article and this theory. To my opinion, cooperation sounds like collusion. When…
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For this comment, I would like to speak about concepts that I learned during an industrial organization course. Actually, when I read the word “cooperation” in an economic field, it immediately reminds me the game theory and I think we can make a kind of parallel between the article and this theory.

To my opinion, cooperation sounds like collusion. When firms in an oligopoly starts to cooperate, that brings for them a bigger profit to share in disregard to the society in its whole and the economic efficiency. Thus, if we consider a few number of firms evolving on a specific market, their optimal strategic behaviour might be to cooperate (by fixing prices, exchanging confidential information, and so on) in order to make more benefits. But this is a flagrant case of collusion, and we all know that it is forbidden (at least for the explicit collusion). On the other hand, we know that in a duopoly, the sum of the firms’ profits will be inferior than in a monopoly. That’s the reason why firms have individually a bigger interest to deviate from the cooperative equilibrium.

Depending on the spillovers that R&D bring, cooperation will benefits society or not. If they are weak, we should advice firms to cooperate. A kind of inverse phenomenon seems to happen in this case because here, the cooperation improve the general welfare. But the condition is that the spillovers have to be weak!

In order to conclude, do never forget that competition always stimulate a market. Moreover, you should always be careful with cooperation, because it might be easy falling into a collusion’s case.

Source:
http://www.isid.ac.in/~planning/ConferenceDec07/Papers/RupayanPal.pdf

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Clarisse Werbrouck
As I see it, the results of the paper "Cooperative and Non-cooperative R&D in Duopoly with Spillovers" make a lot of sense. The fact that there are a lot of spillovers or not will definitely influence the way companies will conduct their R&D spending strategies. This being said, we should not forget that we make a major hypothesis for this…
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As I see it, the results of the paper “Cooperative and Non-cooperative R&D in Duopoly with Spillovers” make a lot of sense. The fact that there are a lot of spillovers or not will definitely influence the way companies will conduct their R&D spending strategies. This being said, we should not forget that we make a major hypothesis for this conclusion: the companies that cooperate in their R&D spending will work efficiently together. What happens if these companies are unable to work together? It may be that for the same amount of R&D spending, the results while cooperating will be smaller than the results the company might have achieved alone. The results for the society as a whole will thus also be lesser than the non-cooperative case.

What I want to say here is that companies come with their own corporate culture, values, processes and an efficient cooperation will only be reached if these factors are taken into account. Indeed, people are most of the time averse to change. By asking people of two (or more) different environments to cooperate as efficiently as they would have normally is not something as easy as it seems. Before taking the decision to cooperate with another firm, managers should first ask themselves if finding a common ground to work on is possible. Even if the probability of spillovers is high, two inadequate companies will reach lesser results. However, if managers estimate that their company might be compatible with each other, cooperation seems to be the right option. Of course, it is not good enough to evaluate the possibility of a common ground: managers should also implements things in order for the employees to develop this “common ground” in practice to work efficiently together.

To sum up, there are many factors to take into account before opting for cooperative R&D spending strategies. The one I have developed here is about the firms compatibility in terms of corporate culture and processes but many other factors will influence the way firms will cooperate: for example, if the employees of both firms don’t feel like working together, it might lead to a duplication of efforts (which is basically the same as the non-cooperative case) or unhealthy rivalry between the two “clans” to see which one will find something first. Objectives and incentives need to be aligned in both companies so that their cooperation is as efficient as possible.

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Solène Thibaut
In my opinion, I think it also partly depends on the link between the two firms. R&D cooperation is particularly efficient when applied to firms not located on the same level of the industrial chain or not even on the same chain. I believe that with the same budget two firms for example aiming to develop the same technology…
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In my opinion, I think it also partly depends on the link between the two firms. R&D cooperation is particularly efficient when applied to firms not located on the same level of the industrial chain or not even on the same chain. I believe that with the same budget two firms for example aiming to develop the same technology (but maybe with different desired goals) could come up with twice the amount of innovative ideas because the basics are the same.

Let me illustrate it with two concrete examples :

Firstly, if I recall my previous post regarding the ultrasonic gesture control, the videogames and the smartphone industries could have cooperate in order to spare time, energy and money because the commercialization of a new videogame using this brand new technology doesn’t directly have an impact on the smartphone industry turnover. In this case thus it would have been efficient to partly cooperate on the basics. The applications should of course be made separately.

Secondly, if we assume an industry where the supplier would like to develop a new software to better manage its stocks, I would be a good idea to cooperate with all the industrial chain because thereby they could all come up with lower costs and thus larger margin without any harm because it’s vertical cooperation.

In a nutshell, I believe that when the cooperation does not have a negative impact on none of the two firms and when the competition links are weak, it is a good thing.

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Bertrand RIbonnet
In the R&D field, choosing between cooperation and competition must be studied on a case-by-case basis. On the top of spillovers, there exist a multitude of factors having an impact on this decision. Let me isolate three of them: the market structure, the strategic importance of the innovation for the organization and the infrastructure of firms. First of all, the…
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In the R&D field, choosing between cooperation and competition must be studied on a case-by-case basis. On the top of spillovers, there exist a multitude of factors having an impact on this decision. Let me isolate three of them: the market structure, the strategic importance of the innovation for the organization and the infrastructure of firms.

First of all, the market structure as well as the consequences of such a decision on this structure have to be taken into account while deciding to cooperate or not. A firm that enjoys a monopoly position will have a very low incentive to share the costs of innovation with their competitors. By doing so, they would run the risk of losing their dominant position due to a commercial success of this shared innovation or due to an intern leak of their knowledge.
At the opposite, firms competing in a perfectly competitive market could have a larger incentive to cooperate in order to try to extract from this non-profitable situation. By joining forces they can succeed in creating a profitable oligopoly.

Secondly, a firm could be reluctant to share the researches about a particular project if this project is of a huge importance for them. Companies have all interest to act in a non-aggressive way with their competitors. They can show themselves in the best possible light and cooperate as far as projects of little impact are concerned but they will free ride if this project can give them a substantial competitive advantage.

Finally, a more practical factor can be put forward. The distance between firms for example. If we are talking about a worldwide competition, firms will have difficulties to act efficiently because of communication problem. Cooperation could be more sustainable if companies are organised in cluster for example, so that researchers can physically see each other.

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Alexandre Faber
Additionally to spillovers, I suggest that market asymmetries, intellectual synergies, and the institutional arrangement also matter for the choice between R&D cooperation and competition. If the market structure is characterized by asymmetries in that market shares are unbalanced, smaller firms might have an incentive to join forces thereby enabling their joint R&D budget to “compete” with big firms’ R&D budgets. This…
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Additionally to spillovers, I suggest that market asymmetries, intellectual synergies, and the institutional arrangement also matter for the choice between R&D cooperation and competition.
If the market structure is characterized by asymmetries in that market shares are unbalanced, smaller firms might have an incentive to join forces thereby enabling their joint R&D budget to “compete” with big firms’ R&D budgets. This could especially be the case in dynamic branches of the economy, where innovation is crucial to the survival of the firm, and unless small firms were to join forces in their R&D efforts, they would be ousted from the market.
Furthermore, and as was already mentioned by Amandine, there could be some intellectual synergies. Particularly, the research staffs, although hired by companies that are competing on the same market, might have different approaches to R&D and might have focused on different questions so far, so R&D cooperation might provide an intellectually stimulating environment for fresh thoughts to emerge.
Finally, institutions also matter. Essentially, spillovers are usually negatively correlated to the degree of patent protection, i.e. patent laws and their de facto enforcement. Also important for the option of R&D cooperation to be possible, there must be institutions in place to protect R&D cooperation participants from cheaters (but then again if these institutions are not in place, why would IPR be better enforced, in which case nothing matters really, since imitation is also okay…).

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Brasseur Amandine
In my opinion, there are always more in two heads than in one. Starting with this idea, I’m pro R&D cooperation. But as it has been shown in the text, certain circumstances are needed to let the R&D cooperation the best way to spur innovation. Those circumstances are “when firms behave strategically, R&D cooperation leads to more R&D when spillovers…
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In my opinion, there are always more in two heads than in one. Starting with this idea, I’m pro R&D cooperation.

But as it has been shown in the text, certain circumstances are needed to let the R&D cooperation the best way to spur innovation. Those circumstances are “when firms behave strategically, R&D cooperation leads to more R&D when spillovers are large but to less R&D when spillovers are small”.

As always in an economic issue, the answer varies with the market structure. But we saw in all our economics courses that states can have an impact on this structure in aim to reach the highest social welfare.

I think that it’s possible for the government to create some incentives to have a large spillover (maybe more grants for an industry where the companies implement a spillover process). Indeed, there are still some public policies concerning the R&D cooperation as the European Framework Programmes encouraging firms to pool their R&D activities (Industrial Organization: Market and Strategies. By Paul Belleflamme and Martin Peitz, p. 499).

Another reason to encourage R&D cooperative is that it doesn’t only lead to more R&D (if there are the good circumstances), it’s also a way to alleviate the three sources of market failures resulting of IP generating activities (externalities, indivisibilities and uncertainty) (Industrial Organization: Market and Strategies, P. 499).

In conclusion, I believe that we have to wait how politics can impact the market structure (particularly the spillover process) to find an answer.

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