Expenditure patterns and timing of patent protection in a competitive R&D environment

Expenditure patterns and timing of patent protection in a competitive R&D environment

0.00 Avg rating0 Votes
Article ID: iaor19982876
Country: Netherlands
Volume: 20
Issue: 5
Start Page Number: 237
End Page Number: 242
Publication Date: Jun 1997
Journal: Operations Research Letters
Authors: ,
Keywords: competition
Abstract:

In this paper we consider a stochastic R&D decision model for a single firm operating in a competitive environment. The study focuses on the firm's optimal policy which maximizes the expected discounted net return from the project. The firm's policy is composed of two ingredients: a stopping time which determines when the developed technology should be introduced and protected by a patent, and an investment strategy which specifies the expenditure rate throughout the R&D program. The main findings of the study are: (a) Under a constant expenditure rate strategy, the optimal stopping time of the project is a control limit policy of the following form: stop whenever the project's state exceeds a fixed critical value, or when a similar technology is introduced and protected by one of the firm's rivals, whichever occurs first. (b) For an R&D race model in which the winner-takes-all competition and the loser's return is zero, we show that the firm's optimal expenditure rate throughout the R&D program increases monotonically as a function of the project's state. In order to gain a better insight regarding optimal R&D programs in competitive markets we examine the effect of key economic parameters on the firm's optimal policy.

Reviews

Required fields are marked *. Your email address will not be published.