Abstract
This paper takes issue with the current view of R&D and industry structure according to which cooperation in R&D effort is Pareto improving over competition. We argue that this literature fails to capture the essence of the Western experience, and secondly, that it fails to capture the essence of R&D itself, namely as constituting a highly uncertain, multidimensional heuristic activity. Using a more suitable model of R&D, we reexamine the competition versus cooperation debate. We derive conditions under which competition dominates cooperation and vice versa. We submit that our approach and results better describe the U.S. and Western experience, than does the game-theoretic approach.
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