Product Innovation With Partial Capacity Rollover

Dawid H, Kopel M, Kort PM (2019) Universität Bielefeld Working Papers in Economics and Management; 02-2019.
Bielefeld: Bielefeld University, Department of Business Administration and Economics.

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Abstract / Bemerkung
This paper analyzes how the transferability of production capacities from an established to a new product influences the incentives of a firm to invest in R&D. A dynamic duopoly model is considered, where initially both firms offer a homogeneous product. The firms invest in production capacities and simultaneously in R&D which determines their innovation rate. The firm that innovates first extends its product line and obtains a patent for the new product that prevents the other firm from catching up. Upon the launch of the new product, the innovator then has the option to transfer part of the capacity for the established product to the production process of the new product. If capacities can be rolled over to the new product, a trade-off can be detected in that this rollover option gives the larger firm more incentive to innovate, whereas the cannibalization effect gives the smaller firm a higher innovation incentive. As a logical consequence we find that the larger firm is expected to innovate first when the capacity transfer does not involve a too high capacity loss. However, if the losses of capacity transfer are considerable, the cannibalization effect starts to dominate and the smaller firm’s incentive to innovate is larger.
Stichworte
dynamic duopoly; product innovation; capital accumulation; differential games; Markov perfect equilibrium; capacity rollover; etace_WP
Erscheinungsjahr
2019
Band
02-2019
ISSN
2196-2723
Page URI
https://pub.uni-bielefeld.de/record/2934688

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Dawid H, Kopel M, Kort PM. Product Innovation With Partial Capacity Rollover. Universität Bielefeld Working Papers in Economics and Management. Vol 02-2019. Bielefeld: Bielefeld University, Department of Business Administration and Economics; 2019.
Dawid, H., Kopel, M., & Kort, P. M. (2019). Product Innovation With Partial Capacity Rollover (Universität Bielefeld Working Papers in Economics and Management, 02-2019). Bielefeld: Bielefeld University, Department of Business Administration and Economics. doi:10.4119/unibi/2934688
Dawid, H., Kopel, M., and Kort, P. M. (2019). Product Innovation With Partial Capacity Rollover. Universität Bielefeld Working Papers in Economics and Management, 02-2019, Bielefeld: Bielefeld University, Department of Business Administration and Economics.
Dawid, H., Kopel, M., & Kort, P.M., 2019. Product Innovation With Partial Capacity Rollover, Universität Bielefeld Working Papers in Economics and Management, no.02-2019, Bielefeld: Bielefeld University, Department of Business Administration and Economics.
H. Dawid, M. Kopel, and P.M. Kort, Product Innovation With Partial Capacity Rollover, Universität Bielefeld Working Papers in Economics and Management, vol. 02-2019, Bielefeld: Bielefeld University, Department of Business Administration and Economics, 2019.
Dawid, H., Kopel, M., Kort, P.M.: Product Innovation With Partial Capacity Rollover. Universität Bielefeld Working Papers in Economics and Management, 02-2019. Bielefeld University, Department of Business Administration and Economics, Bielefeld (2019).
Dawid, Herbert, Kopel, Michael, and Kort, Peter M. Product Innovation With Partial Capacity Rollover. Bielefeld: Bielefeld University, Department of Business Administration and Economics, 2019. Universität Bielefeld Working Papers in Economics and Management. 02-2019.
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2019-09-06T09:19:06Z
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