Cooperating in R&D and Advertising - Parisa Pourkarmi and Gamal Atallah

The study of the strategic interaction between competitors’ R&D and advertising shows that the advertising of a firm complements its competitor’s R&D and advertising when advertising spillovers are positive and large enough. [...] A major finding of recent contributions is that the goals and determinants of R&D cooperation differ depending on the type of R&D and 2 Spillovers refer to R&D and advertising spillovers. [...] Although there is a large theoretical and empirical literature analyzing the importance of R&D and marketing along with the effects of cooperative R&D and advertising on firm value, performance, and strategies, there is no theoretical or empirical literature studying the impact of R&D and advertising cooperation on innovation, profits, and welfare. [...] The ranking of cooperative structures rests on R&D and advertising externalities which capture the effect of the R&D and advertising of a firm on the rival’s profit. [...] The model provides some considerations of R&D policy and advertising regulation from the point of view of the incentives of cooperation and mergers.