<scp>Cooperative R&amp;D with Endogenous Technology Differentiation</scp>

Abstract

We study a nontournament R&amp;D duopoly. Before the standard R&amp;D investment and quantity‐setting stages, we consider a stage in which firms choose their R&amp;D technologies. Spillovers negatively depend on R&amp;D technology differentiation. We show that, in equilibrium, firms will choose identical or very similar R&amp;D processes. Such equilibria may entail less differentiation than would be dictated by social welfare maximization.