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- Publisher
- INFORMS
- Copyright
- Copyright © INFORMS
- Subject
- Research Article
- ISSN
- 0025-1909
- eISSN
- 1526-5501
- DOI
- 10.1287/mnsc.33.12.1563
- Publisher site
- See Article on Publisher Site
Abstract
This paper investigates equilibrium R&D investment strategies of firms endowed with different innovation potentials. To address this issue, this paper permits two stages of innovation and develops a simple stochastic game model involving two firms. It is shown that in equilibrium, a leader in the multiple stage innovation game invests more than a follower; firms compete more vigorously in the later stages of innovation than in the earlier stages; and a follower is more likely to choose a riskier innovation path than one requiring, on average, equivalent effort. It provides an explanation of how the expected benefits, the cost of R&D, and interactions between competing firms combine to determine dynamic R&D strategies over time.
Journal
Management Science – INFORMS
Published: Dec 1, 1987
Keywords: Keywords : research and development ; game theory ; Nash equilibrium ; risky choice