Market Competition, R&D and Firm Profits in Asymmetric Oligopoly∗

We investigate a Cournot model with strategic R&D investments wherein efficient firms (dominant firms) compete against less efficient firms (fringe firms). We find that an increase in the number of fringe firms can stimulate R&D by the dominant firms, while it always reduces R&D by the fringe firms. More importantly, this force can be strong enough to compensate for the loss that arises from more intense market compe-tition: the dominant firms ’ profits may indeed increase with the number of fringe firms. An implication of this result is far-reaching, as it gives dominant firms to help, rather than harm, fringe competitors. We relate this implication to a practice known as open knowledge disclosure, especially Ford’s strategy of disclosing its know-how publicly and extensively at the beginning of the 20th century