Does R&D cooperation with competitors cause firms to invest in R&D more intensively? Evidence from Korean manufacturing firms

Abstract

This study aims to examine whether R&D cooperation with competitors promotes firm R&D investment. Although some theoretical models and anecdotal examples imply that firms may be discouraged from investing in R&D that arises from R&D cooperation with competitors, there are relatively few empirical studies that analyze the relationship between R&D cooperation with competitors and firm innovation input, compared to the theoretical models, and most empirical studies argued that R&D cooperation causes firms to invest in R&D more intensively. This study aims to fill this lacuna in the existing literature by empirically investigating the relationship between R&D cooperation with competitors and firm R&D intensity, primarily focusing on moderating factors influencing a degree of spillovers among firms, or a firm’s ability and an incentive to utilize spillovers, which shape the relationship. Using a panel data set of Korean manufacturing firms, we find the following: First, firm-specific absorptive capacity has a positive moderating effect on the relationship. Second, a firm-specific employee turnover rate has a negative moderating effect on the relationship. Third, firm-specific market power has a negative moderating effect on the relationship. Fourth, after controlling for the moderating effects, we find that the stand-alone (or direct) effect of R&D cooperation with competitors on firm R&D intensity is negative. Finally, the stand-alone effect and the moderating effects are more pronounced for firms operating in high-technology industries. We argue that R&D cooperation with competitors per se may not provide firms with the incentive to increase their R&D investment due mostly to opportunism and low appropriability caused by the increased spillovers among competitors. In addition, public sectors and firms should consider each firm’s ability and an incentive to utilize increased spillovers caused by R&D cooperation with competitors.