Information Sharing in Joint Research and Development

In today's science-driven industries, such as the semiconductor industry, firms are increasingly engaged in across-firm research and development projects in the form of a research consortium or a strategic alliance. Those collaboration processes, however, have complex aspects due to the competing relationship of the firms in product markets and will not be successful unless the participating firms have enough incentives to reveal their private information and to exert sufficient efforts. The paper attempts to explore the conditions under which firms have enough incentives to reveal their information and/or to expend collaborative efforts. Three existing economic models are examined for this purpose. It is argued that those incentives depend upon the nature of competition in the product markets, information structure, and the way that each firm's private information affects this competition. The models examined in the paper suggest that some mechanism is necessary to evaluate private technical information of each firm and to convey it to the other firms without distortion. This conclusion coincides with the observed fact that a neutral third-party plays an indispensable role in a successful research consortium.