Knowledge sharing in cooperative research and development

This article examines the effects of knowledge sharing or endogenous spillovers among R&D consortia participants on R&D competition when R&D enhances a firm's absorptive capacity. A three-stage model illustrates how different compositions of R&D consortia affect endogenous spillover rates and R&D spending of participants. When consortium participants possess complementary knowledge, the model suggests that participation increases the degree of knowledge sharing and intensifies firms' R&D efforts to learn from other members compared with the case when no cooperation takes place. This type of R&D consortia is welfare enhancing, justifying government support for these projects. Copyright © 2003 John Wiley & Sons, Ltd.