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Contribution to Book
Strategic R&D with uncertainty
The economics of innovation: incentives, cooperation, and R&D policy (2008)
  • Jeroen Hinloopen
The literature on strategic research and development (R&D) treats the process of R&D as a deterministic event although one of the main reasons for firms to engage in cooperative R&D is to share the risk of R&D investments. We examine the incentives of firms to embark on a research joint venture (RJV) in a world where the returns to R&D are uncertain. In this world firms are confronted with a fundamental trade-off towards cooperation in R&D: engaging in an RJV is likely to increase the probability of succes in R&D, but it also implies that the fruits of a successful R&D project have to be shared with the RJV partners. We examine this issue by modelling explicitly the R&D success probability in a model of strategic R&D. Depending on the extent to which an RJV increases the probability of success in R&D conventional wisdoms as to the incentives of firms to cooperate in R&D are falsified or confirmed. These results also imply clear predictions as to the type of industries where RJVs can be expected to be formed.
  • R&D cooperation,
  • uncertainty,
  • economies of scope
Publication Date
Roberto Cellini and Luca Lambertini
Contributions to economic analysis
Citation Information
Jeroen Hinloopen. "Strategic R&D with uncertainty" The economics of innovation: incentives, cooperation, and R&D policy Vol. 286 (2008) p. 99 - 111
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