R&D and knowledge transfer strategies

Abstract

We study the incentives for firms to share knowledge when they engage in R&D in order to make an uncertain innovation. The ini- tial stock of knowledge may be unevely distributed, and we look at how this affects the type of cooperative agreements that the firms will find it profitable to enter in to. Specifically, we consider the cases in which firms share initial knowledge only (reciprocal cross-licensing), new knowledge only (Technology Sharing Cartel), and one involving full reciprocal knowledge transfer (similar to a patent pool). These cases are compared to each other, and to the initial benchmark situa- tion in which firms go it alone. We find that some kind of cooperative agreement will always dominate the go-it-alone solution; we use the analysis to delineate situations in which cooperation should involve transfer of all or just new knowledge, and show that simply sharing prior knowledge is dominated by the other cooperative agreements. We consider the effects of knowledge sharing on R&D, and draw con- lusions for industrial policy and firm strategy.