Competition vs. collaboration in the generation and adoption of a sequence of new technologies: a game theory approach

Abstract

ABSTRACTThe study provides a game theoretic exploration of firms’ decisions on whether to compete or collaborate in the generation and adoption of a sequence of new technologies. Different from models proposed by previous studies, which concentrates on process innovation and a two-strategy set (innovation or do nothing), the present game theory model emphasises product innovation and a three-strategy set (innovation, collaboration, or do nothing). The study makes three contributions. The proposed game theory model extends current understanding of the impacts of collaboration possibilities and collaboration cost in a dynamic game theory. Further, the model clarifies the impact of transaction costs on the outcome. Finally, the study finds that the relationship between collaboration costs is not univariate, but depends on the market type and various market characteristics, such as technology gap, technology level, the product substitution index, transaction costs, and the discount rate of price sensitiveness.