Firms' R&D Cooperation Behavior in a Supply Chain

Firms' R&D Cooperation Behavior in a Supply Chain

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Article ID: iaor201524705
Volume: 23
Issue: 4
Start Page Number: 599
End Page Number: 609
Publication Date: Apr 2014
Journal: Production and Operations Management
Authors: , ,
Keywords: management, production, behaviour, research, decision
Abstract:

This study investigates firms' R&D cooperation behavior in a supply chain where two firms first cooperate in R&D investments and then decide the production quantity according to a wholesale price contract. By using a concept named contribution level that measures a firm's technological contribution to the R&D cooperation in the supply chain, we show that both firms can achieve win–win via cartelization only if their contribution levels are Pareto matched, i.e., when each firm's contribution level is comparable to its partner's. When spillovers are endogenized, we further establish that an increasing spillover always benefits both firms without any R&D cooperation, but only benefits the firm whose contribution level is relatively low when under R&D cartels. Finally, we show that the path of first increasing spillovers to be perfect and then forming a cartel has a higher chance of achieving the best mode in terms of profitability.

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