Is Research Competition More Innovative than Research Collaboration?
© 2021 EPFL
At HICSS 54 in January 2021, Prof. Weber compared the incentives for companies to innovate when they can either cooperate or compete in their research efforts. The main insight of the accompanying research paper is that—all else equal—competition tends to provide a very strong motivation to create high-quality innovation. When collaborating, firms are not subject to the strong motivational force of an R&D race, so that they tend to lose the incentives to make their products great. In the context of the recent pandemic, these findings suggest that encouraging competition between different innovators and providing good patent protection are important factors to help firms strive for the best possible vaccine quality.
The research paper was published within the Minitrack on Strategy, Information, Technology, Economics and Society (SITES) at the 54th Annual Hawaii International Conference on System Sciences (HICSS). The SITES has been co-organized by Prof. Weber (EPFL) and Prof. Kauffman (Copenhagen Business School) for more than a decade, and is now in its 34th year.
Abstract
Research and development (R&D) collaborations are horizontal agreements among firms to join forces in their inventive activities. As in the context of the recent COVID-19 global pandemic, such collaborations are often promoted with an argument of increased R&D productivity. In numerous contexts, especially when marginal production costs are low, such as for medications or for software, the consumers’ surplus depends critically on the best-performing product available on the market, for—all else equal—this product will tend to take a dominant position. Using a simple two-stage model of innovation and subsequent product commercialization on a market with heterogeneous consumers, we show that a noncollaborative patent race with patent protection (for the best product) provides strong innovation incentives, leading to better performing products than a regime of noncollaborative research without patent protection or of collaborative research (with profit sharing).
Weber, T.A. (2021) “Collaborative Innovation (or Not?!) When Product Performance Is Critical,” Proceedings of the 54th Annual Hawaii International Conference on System Sciences (HICSS), pp. 6535—6542. [Download]
Kauffman, R.K., Weber, T.A. (2021) “Introduction to the Minitrack on Strategy, Information, Technology, Economics, and Society (SITES),” Proceedings of the 54th Annual Hawaii International Conference on System Sciences (HICSS), pp. 6502—6504. [Download]