Francisco Poggi, University of Mannheim

"Strategic concealment in Innovation Races"

Abstract

We investigate firms’ incentives to conceal intermediate research discoveries in in- novation races. To study this, we introduce an innovation game where two racing firms dynamically allocate their resources between two distinct research and development (R&D) paths towards a final innovation: (i) developing it with the currently available but slower technology; (ii) conducting research to discover a faster new technology for developing it. We fully characterize the equilibrium behavior of the firms in the cases where their research progress is public and private information. Then, we extend the private information setting by allowing firms to conceal or license their intermediate discoveries. Firms may conceal their interim discoveries during innovation races, which can lead to a slower pace of innovation that is inefficient, particularly when the reward for winning the race is high.

Coauthor: Yonggyun Kim (Florida State University)

Contact person: Egor Starkov