The effects of competition on the R&D portfolios of multiproduct firms

Ping LIN, Wen ZHOU

Research output: Journal PublicationsJournal Article (refereed)

10 Citations (Scopus)

Abstract

We investigate the RandD portfolio choices of multiproduct firms. When a firm increases cost-reducing RandD investment in a given product, its rivals will modify their entire RandD portfolios by reducing RandD investments in that particular product and increasing RandD investments in other competing products. Our analysis demonstrates that RandD portfolios will be more specialized when firms face greater competition, which will be the case if products become closer substitutes, a monopolist begins to face competition from a rival firm, or firms compete on price rather than quantity. RandD cooperation allows firms to internalize the negative externalities of their RandD investments in two ways: by reducing such investments across all products and by increasingly focusing their RandD portfolios on different products. Firms may completely shut down a subset of their RandD projects under RandD cooperation if the products concerned are sufficiently close substitutes.
Original languageEnglish
Pages (from-to)83-91
Number of pages9
JournalInternational Journal of Industrial Organization
Volume31
Issue number1
Early online date28 Nov 2012
DOIs
Publication statusPublished - Jan 2013

Fingerprint

Multiproduct firms
RandD
Costs
Substitute
Negative externalities
Monopolist
Portfolio choice

Keywords

  • R&D portfolio
  • Multiproduct firms
  • Cross-market effect
  • R&D cooperation

Cite this

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The effects of competition on the R&D portfolios of multiproduct firms. / LIN, Ping; ZHOU, Wen.

In: International Journal of Industrial Organization, Vol. 31, No. 1, 01.2013, p. 83-91.

Research output: Journal PublicationsJournal Article (refereed)

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