R&D Investment Strategy and Synergy Mechanism of Supply -Chain Firms under Competition Environment

Abstract

Abstract: Technological innovation is an important way for a supply chain firm to gain competitive advantage. By using game theory, a model is presented for chain to chain competition with two suppliers engaged in R&D and two competing manufacturers. With this model, the competition equilibrium, R&D strategy and synergistic conditions of supply chains with technological spillovers are analyzed. Results show that vertical R&D cooperation is the dominant strategy of supply chains to bring higher equilibrium profit and R&D input level than those of firms without cooperation activities. It also shows that appropriate technological spillover can improve innovation enthusiasm of suppliers. However, suppliers and manufacturers select R&D cooperation only in a finite R&D cost allocation range due to their self-serving motives. The R&D cost should be allocated in the interval such that the stability and synergy effect of R&D cooperation can be reached. Thus, cost allocation mechanisms are designed based on cooperation satisfaction to realize the synergy effect of vertical R&D cooperation, with which the benefits of both partners can be better coordinated by NASH negotiation model.

Key words: chain to chain competition, technological spillovers, vertical R&D cooperation, game theory

Li Wei-hong1,2, Bai Yang1. R&D Investment Strategy and Synergy Mechanism of Supply -Chain Firms under Competition Environment[J]. Industrial Engineering Journal , 2013, 16(2): 80-86.

References

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