Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26072
Year of Publication: 
2007
Series/Report no.: 
CESifo Working Paper No. 2027
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We present a model where firms make competitive decisions about the optimal duration (or time to build) of their R&D projects. Choosing its project's duration, the firm can choose to become a leader or a follower, based on its R&D efficiency, the size of the R&D to be carried out and the degree of innovation, which this research will produce. It is shown that asymmetry in R&D efficiency between firms is an important factor determining feasibility of the preemption and attrition scenarios in competitive R&D with time to build. Scenarios of attrition and preemption games are most likely to occur when competitors have similar R&D efficiencies. In case of largely asymmetric firms the games of attrition and preemption are very unlikely, thus the R&D duration choices of firms are determined by the actual trade-off between the benefits of earlier innovation and the costs of faster R&D project completion.
JEL: 
C72
D21
O31
Document Type: 
Working Paper
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