STABLE R&D COOPERATION BETWEEN ASYMMETRIC PARTNERS

The impact of asymmetries between partners on the stability of R&D cooperation is assessed analytically in a supergame setting. Two asymmetric firms are repeatedly taking sequential R&D and production decisions, whereby they coordinate their R&D decisions, in order to maximise joint profits. The asymmetries are specified in terms of absorptive capacity (i.e. size of the spillovers), R&D efficiency (i.e. ability to implement know how) and productive efficiency or market size (i.e. net demand intercept). First of all, it is shown that these asymmetries may not be too large, in order to guarantee that the disadvantaged firm remains interested in joining an R&D cooperative agreement. Furthermore, each asymmetry is shown to make the advantaged firm more inclined to stick to the cooperative outcome (than in the symmetric case), while the reverse holds for the disadvantaged firm. Finally, these asymmetries, when occurring simultaneously, mutually reinforce each other. All in all, R&D cooperation between asymmetric partners will typically be beneficial for the advantaged firm and wil