Competition in Product Design: An Experiment Exploring Innovation Behavior

Cantner, Uwe; Güth, Werner; Nicklisch, Andreas; Weiland, Torsten

doi:10.1111/j.1467-999x.2009.04057.x

Cited by 15 publications

(10 citation statements)

References 47 publications

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“…One reason could be leapfrogging, i.e. increased competition by those lagging behind, for instance in accumulated profits (see, e.g., Cantner et al, 2009). A firm which is less successful on one market might try to "win" the other market.…”

Section: Discussionmentioning

confidence: 99%

Testing Forbearance Experimentally: Duopolistic Competition of Conglomerate Firms

Güth

Häger

Kirchkamp³

et al. 2015

International Journal of the Economics of Business

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Like Feinberg and Sherman (1985) and Phillips and Mason (1992), we test experimentally whether conglomerate firms, i.e. firms competing on multiple, structurally unrelated markets, effectively limit competition. Unlike these authors, our more general analysis assumes differentiated rather than homogeneous products and distinguishes strategic substitutes as well as complements to test their forbearance hypothesis. We vary the duration of the interaction to disentangle effects of forbearance and repetition. Surprisingly, rather than limiting competition, conglomerate firms foster it. In line with our expectations, we find more cooperation with strategic complements than with strategic substitutes and also more cooperation with long term than with short term interaction.

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Section: Discussionmentioning

confidence: 99%

Testing Forbearance Experimentally: Duopolistic Competition of Conglomerate Firms

Güth

Häger

Kirchkamp³

et al. 2015

International Journal of the Economics of Business

Self Cite

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“…Meloso, Copic, and Bossaerts (2009) use a combinatorial task, with an optimal non-obvious solution, and find that participants disseminate intellectual discoveries better in a market than in a patent system. Cantner et al (2009) model R&D as a multidimensional search process with uncertainty, in which the best option is randomly determined. They investigate competition for innovation in a patent race scenario to classify investor types, finding that most subjects use objective investment criteria.…”

Section: Related Experimental Literaturementioning

confidence: 99%

“…A perfect laboratory task should include the use of both financial and creative resources, and should recreate both the incentive structure and the uncertainty of actual innovation settings. Some of the existing experiments forfeit creativity, opting for a search task (see, for instance, Cantner et al 2009;Meloso, Copic, and Bossaerts 2009;Ederer and Manso 2013;Buchanan and Wilson 2014). Others forfeit the dynamic nature of the task and 4 control over the results of the creation process to focus on creativity only (see, for instance, Buccafusco and Sprigman 2010, who let the subjects write poems).…”

Section: Introductionmentioning

confidence: 99%

Intellectual Property Rights Hinder Sequential Innovation -- Experimental Evidence

et al. 2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: In this paper we contribute to the discussion on whether intellectual property rights foster or hinder innovation by means of a laboratory experiment. We introduce a novel Scrabble-like creativity task that captures most essentialities of a sequential innovation process. We use this task to investigate the effects of intellectual property allowing subjects to assign license fees to their innovations. We find intellectual property to have an adversely effect on welfare as innovations become less frequent and less sophisticated. Communication among innovators is not able to prevent this detrimental effect. Introducing intellectual property results in more basic innovations and subjects fail to exploit the most valuable sequential innovation paths. Subjects act more self-reliant and non-optimally in order to avoid paying license fees. Our results suggest that granting intellectual property rights hinders innovations, especially for sectors characterized by a strong sequentiality in innovation processes. Terms of use: Documents in EconStor may Keywords IntroductionThe question whether society should grant intellectual property (IP) rights to innovators has been discussed widely in economics, law and politics. In this paper we contribute to the debate by means of a controlled real-effort laboratory experiment involving creativity. We introduce a novel design that allows us to create counterfactual situations and test directly the effects of IP rights on the innovation rate and welfare of a laboratory economy.The issues of what are the optimal extent and nature of IP rights have been long debated, but neither theoretical nor empirical research has provided a final answer. Theoretical results cut both ways. Conventional wisdom is largely derived from static models, and does not robustly survive in dynamic, sequential innovation models that best describe sectors characterized by cumulative research (Scotchmer 1991). The question of IP in dynamic, sequential models has been raised by several theoretical studies. They tend to offer a less positive view of the effect of IP on the rate of innovations and thus aggregate welfare. Green and Scotchmer (1995) study the division of profits between sequential innovators and suggest that it is desirable to minimize patent life. Moschini and Yerokhin (2008) In this paper we exploit the unique characteristic of laboratory experiments of allowing to easily build counterfactual situations while retaining control...

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“…The results of their experiment correspond to the model, aside from some races in which subjects perform worse than anticipated. Cantner et al (2009) test a patent race model limited to a duopoly market without price competition by implementing a multi-dimensional search task with uncertainty. They find that different strategies solve the task, namely risky innovative investment and risk-free imitations.…”

Section: Randd Competitionmentioning

confidence: 99%

Laboratory experiments in innovation research: a methodological overview and a review of the current literature

Brüggemann

Bizer

2016

J Innov Entrep

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Innovation research has developed a broad set of methodological approaches in recent decades. In this paper, we propose laboratory experiments as a fruitful methodological addition to the existing methods in innovation research. Therefore, we provide an overview of the existing methods, discuss the advantages and limitations of laboratory experiments, and review experimental studies dealing with different fields of innovation policy, namely intellectual property rights, financial instruments, payment schemes, and R&D competition. These studies show that laboratory experiments can fruitfully complement the established methods in innovation research and provide novel empirical evidence by creating and analyzing counterfactual situations.

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Competition in Product Design: An Experiment Exploring Innovation Behavior

Cited by 15 publications

References 47 publications

Testing Forbearance Experimentally: Duopolistic Competition of Conglomerate Firms

Testing Forbearance Experimentally: Duopolistic Competition of Conglomerate Firms

Intellectual Property Rights Hinder Sequential Innovation -- Experimental Evidence

Laboratory experiments in innovation research: a methodological overview and a review of the current literature

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