Size of RJVs and Degree of Cooperation in Product Development

In this paper we provide a model of Research Joint Venture (RJV), and study the incentives of competing firms to cooperate in product development. Firms that participate in the RJV decide on the product components for joint development, i.e., they decide on how much to cooperate. We consider three cases: (i) an RJV with an exogenous size and an endogenous scope, (ii) an RJV with an endogenous size and an exogenous scope, and (iii) an RJV with an endogenous size and scope. Using numerical simulations we show that, on average, there is a negative relationship between the size and the scope of the RJV in both cases (i) and (ii). In case (iii), we find a positive relationship between the equilibrium size and the equilibrium scope of the RJV. Furthermore, both the equilibrium size and scope of the RJV are increasing with the industry size.