همکاری در توسعه محصول و فرایند R & D بین رقبا

In this paper, we first provide a simple framework for cooperation in product development between competitors. We put forward the trade-off between the benefits obtained through development cost-sharing and the cost of intensified competition due to reduced product differentiation, which implies that no-cooperation can be an equilibrium outcome. We allow for firms to cooperate partially, i.e., to develop some product components jointly, but not necessarily all components. This enables us to study the factors that may have an effect on the degree of cooperation in product development, both in the presence and in the absence of process R&D. We also analyze the interaction between cooperation decisions on product development and process R&D. By considering a direct link between the two, we show that the degree of cooperation in product development may adversely affect the intensity of cooperation in process R&D.

Many products are made of distinct product components that, on their own, have no value to end consumers. In the automotive industry, for instance, a number of product components (e.g., engine, break system, suspension system, etc.) are used to produce a single vehicle. Usually, one distinct product component can be used to produce a variety of products, provided that the relevant interfaces in different varieties are fairly standardized. This is why different firms (that may or may not be competitors) often agree to develop some product components through cooperative R&D. For example, in September 2005, the BMW Group, DaimlerChrysler AG, and General Motors Corporation signed an agreement to form an alliance for the joint development of a two-mode hybrid drive system for engines that would allow the vehicles to switch to a different driving mode depending on the driving conditions (i.e., in city driving or highway driving). The two-mode hybrid system is now used in different vehicles of all three participants.1 While firms cooperate on the development of a particular product component, each one of them pursues its independent R&D for other product components that are necessary for the creation of a functional end-product. This real-world example illustrates the first important point we would like to emphasize in this paper; firms often cooperate only partially —if at all, and besides the well acknowledged reasons like high transaction costs, this can also be due to the impact of cooperation on product competition. The co-opetitors' (the firms that cooperate in R&D but compete in product markets) explicit decision on how much to cooperate may also involve an implicit decision on how much to compete. This is because even if firms may prefer a higher degree of differentiation (softer product competition) at the outset, they may have limited ability to differentiate their products when they engage in joint product development for too many product components.2 This, in turn, may imply that joint product development, along with its benefits, may involve a cost in terms of intensified product competition, which may be significant in markets where product differentiation matters to consumers. With very few exceptions, notably Vilasuso and Frascatore, 2000, Lambertini et al., 2002, Lambertini et al., 2003, Ghosh and Morita, 2006 and Ghosh and Morita, 2008, the existing literature does not consider any economic cost of cooperation3; it concludes that cooperation is, at least in a weak sense, desirable for firms since they can always replicate the non-cooperative equilibrium. Furthermore, product innovations, by and large, are treated as horizontal improvements in products,4 i.e., investments in product differentiation. In accord with this view, cooperation in product innovations is usually modeled as firms jointly setting the degree of substitution between the products so as to maximize their joint profits.5 We find modeling of product development cooperation as firms jointly setting the degree of substitutability between their products or sharing the cost of product differentiation not satisfactory. We also account for the fact that in a variety of industries, potential competitors cooperate both in product and process innovations. In the majority of the R&D joint ventures that are formed in the automotive industry, for instance, partners cooperate not only on the development of certain product components but also on research to discover more cost-efficient ways to produce those components. For example, BMW, DaimlerChrysler, and General Motors Co. can also cooperate to attain vertical –either cost or quality– improvements on their hybrid system.6 However, it is very unlikely that they would jointly carry such process R&D on distinct product components they have developed independently (such as the break systems). Instead, each firm conducts in-house process R&D on these product components, thus suggesting a direct link between product and process R&D decisions —a link that has been overlooked in the literature and on which this paper aims its focus. With very few exceptions, the literature on R&D cooperation accounts for a single type of R&D activity–product or process.7 The papers that consider both types of R&D activities, notably Lin and Saggi, 2002 and Rosenkranz, 2003, consider only the indirect link between the two decisions, which is their interaction through the competition stage. Considering the aforementioned direct link that is established by the firms' ability to engage in joint process R&D only on the jointly developed product components also enables us to formally distinguish between joint and in-house investments in process R&D.8 We first introduce a simple framework in which firms engage only in product development. We construct a duopoly model with an end-product, composed of distinct components, for which firms can engage in joint development. The degree of cooperation determines the degree of commonality (and hence, the degree of differentiation) in the two end-products. While firms share the cost of developing the common product components, they carry out independent research for the development of the remaining components. Therefore, a higher degree of cooperation (i.e., a higher degree of commonality) leads to savings in development costs, but it intensifies post-innovation competition by reducing the degree of differentiation between the competing end-products. A direct consequence is that no-cooperation can be an equilibrium. The main trade-off we present in this section is also studied by Lambertini et al., 2002 and Lambertini et al., 2003 with a focus on the impact of RJVs on the sustainability of collusive agreements,9 and by Ghosh and Morita, 2006 and Ghosh and Morita, 2008 in the context of inter-firm platform sharing. Ghosh and Morita consider both the cost savings and the reduced degree of differentiation that result due to the use of the same platform –of a given size– by two firms.10 Different than Ghosh and Morita, in our model the degree of differentiation and the degree of cost savings due to joint product development are endogenous to firms' decisions on how much to cooperate on product development. Next, we use a specific demand setting and bring process R&D into the picture to study the interaction between product development and process R&D. Once firms complete their product development, they invest in process R&D, which reduces the cost of producing product components. We consider three scenarios: i) no-cooperation; ii) full-cooperation; and iii) partial-cooperation. For all three scenarios, we assume that firms decide on how much to cooperate in product development. Scenarios differ with respect to the process R&D stage. Under the no-cooperation scenario, we assume that firms decide on their process R&D investments non-cooperatively. Under the full-cooperation scenario, we assume that firms cooperate in process R&D on all product components, and share the process R&D costs. These two scenarios are similar to the two scenarios considered by Lin and Saggi (2002); semi-cooperation and full-cooperation, respectively.11 Similar to Lin and Saggi (2002), we show that under both the no-cooperation and full-cooperation scenarios, the equilibrium process R&D investments decrease with the degree of joint product development. Furthermore, the equilibrium degree of cooperation in product development is higher when the marginal cost of component development and the marginal cost of process R&D are higher. Under the partial-cooperation scenario, which is the novelty of this paper, firms cooperate in process R&D only partially. In particular, we assume that firms can engage in joint process R&D only on the product components that they have developed jointly.12 This assumption introduces a direct link between the degree of cooperation in product development and process R&D decisions, in addition to their interaction through the competition stage. In contrast with the no-cooperation and full-cooperation scenarios, we find that with partial-cooperation the degree of cooperation in product development can be lower when the process R&D cost is higher. Our major finding is that with partial-cooperation the intensity of cooperation in process R&D (defined as relative process R&D investments in the common and non-common product components) decreases with the degree of cooperation in product development. We also show that, for a given degree of cooperation in product development, the ordering of the equilibrium process R&D investments under different scenarios depends on the degree of product differentiation. For high degrees of product differentiation (soft competition in the product market), the process R&D investments are the highest under full-cooperation, and lowest under no-cooperation. The investments under the partial-cooperation scenario lie in between the two, and process R&D investments in the common components are higher than the investments in the non-common components. The reason is as follows; when competition is soft, the marginal return to process R&D investments is high, and cost-sharing with cooperation leads to higher investments in the product components for which firms cooperate. For low degrees of differentiation, the ordering is reversed. This is because when competition in the product market is intense, firms tend to invest aggressively in process R&D for the product components that are not subject to cooperation, and they internalize this competition effect with the product components on which they cooperate. The paper is organized as follows. In Section 2, we outline our basic model of cooperative product development and we highlight the factors that affect the degree of cooperation in product development in the absence of a process R&D stage. In Section 3, we specify a demand setting, introduce process R&D, and study the equilibrium degree of cooperation under the different scenarios. In Section 4 we simulate our model, and provide some welfare analysis. Finally, we conclude.

In this paper, we have provided a simple framework for cooperation in product development between competitors that puts forward the trade-off between the benefits obtained through development cost-sharing and the cost of intensified competition due to reduced product differentiation. A direct consequence is that no-cooperation can be an equilibrium outcome. Our framework also differs from the standard treatment of R&D cooperation in that it allows for firms to jointly develop some product components, and not necessarily all. This enables us to study the factors that may have an impact on the degree of cooperation in product development both in the presence and in the absence of process R&D. We have also analyzed the interaction between cooperation decisions on product development and process R&D. While doing so, we have considered a direct link between cooperation decisions in product development and process R&D, and showed that the degree of cooperation in product development may adversely affect the intensity of cooperation in process R&D. All results, except for those stated in Proposition 1 and Proposition 4 hold under Cournot competition. Different from Bertrand competition, where the strategic effect of process R&D investments on profits is negative, both direct and indirect (strategic) effects are positive with Cournot competition. For a given degree of differentiation, both no-cooperation and full-cooperation scenarios yield a higher equilibrium process R&D investment under Cournot competition than under Bertrand competition. Furthermore, the equilibrium degree of cooperation in product development under Cournot competition is also higher than under Bertrand competition. For a given level of cooperation in product development, the partial-cooperation scenario with Cournot competition yields the following ordering for process R&D investments xFC ≥ xPCα ≥ xPC−α ≥ xNC, which is also true with Bertrand competition, but only for high degrees of differentiation. Finally, we ran numerical simulations to illustrate how introducing a direct link between two cooperation stages affects the likelihood of cooperation in product development, and the degree of cooperation, as well as the social welfare for specified differentiation and product development cost functions. Given our specifications, partial-cooperation yields the highest equilibrium degree of cooperation in product development. However, the social welfare under partial-cooperation lies in between the social welfare under full and no-cooperation. Society benefits most when firms jointly invest in process R&D on all product components (i.e., with full-cooperation). We have adopted a duopoly setting in which the degree of cooperation in product development refers to the number of product components that are jointly developed. However, in an oligopolistic setting, the degree of cooperation may also involve another dimension, that is, the number of firms involved in joint development. One question is then, how the number of participants of an R&D alliance relates to the number of product components that are developed within that alliance, which is left for future research.