Competition vs. collaboration in the generation and adoption of a sequence of new technology

Although there is quite a rich literature relating to competitive innovation there is relatively little relating to technological collaboration. However, ignoring collaborative possibilities may result in overestimation of the importance of selfinnovation. This thesis is therefore mainly concerned with the determinants of collaboration in innovation, taking both a theoretical and an empirical approach. The empirics relate to the manufacturing industry in a Chinese region. The thesis is particularly innovative in emphasising how collaboration costs will be shared when collaboration occurs. We provide a game theoretic exploration of the decisions of firms on whether to compete or collaborate in the generation and adoption of a sequence of new technologies. Different from the models proposed by Vickers, who concentrates upon process innovation and a two-strategy (innovation or do nothing) set, our game theory model emphasises product innovation and either a three-strategy set (innovation, collaboration, and do nothing), or a fourstrategy set (innovation, collaboration, imitation and do nothing). In particular, MATLAB programming is employed for generating the equilibrium solution for each strategy set. We found that the relationship between imitation and collaboration and collaboration cost is not univariate. It depends upon the market type and various market characteristics, such as technology gap, technology level, the product substitution index, transaction costs and the discount rate of price sensitiveness. The results also show that the elasticity of collaboration opportunity with respect to transaction costs in a persistent dominance market is much greater than in an action reaction market. By using data on manufacturing in a Chinese region from 2005 to 2007, derived from the China Innovation Survey and the Annual Corporate Financial Survey, we empirically explored innovation and collaboration patterns. Three factors, innovative ability, absorptive capacity, and catching up capacity were proposed to positively affect both innovation and collaboration. This led to six hypotheses, which were tested using a number of econometric models encompassing selection bias, timing, and dynamics issues. The major finding from the empirical models suggests that innovative ability, absorptive capacity and catching up capacity all impact significantly and positively on collaboration, whilst innovation is positively related only to absorptive capacity. Also, we found that collaboration cost may increase with R&D, employees‘ education, the technology gap and collaboration cost in previous periods, but decrease with transaction cost, patents held, the technology level and perceived price. The thesis makes three contributions. Theoretically, our game theory model not only extends the understanding of the impacts of collaboration possibilities and collaboration cost in dynamic game theory, but also clarifies the impacts of transaction costs and imitation (and thus intellectual property rights (IPR)) on the outcome. Empirically, by introducing new data our work is the first to investigate collaboration patterns and collaboration cost sharing strategies in a mid-income level developing country. Last but not least, using MATLAB animation programming to simplify the calculation process of the game theory equilibrium may be considered as a methodological contribution.