Profit-sharing and investment strategies of a one-leader-one-follower R&D alliance with industrialisation risks
by Jing Li; Wei Liu; He Zhang
International Journal of Product Development (IJPD), Vol. 21, No. 2/3, 2016

Abstract: This paper investigates the profit-sharing and investment strategies for new product development in a one-leader-one-follower R&D alliance while considering the industrialisation risks involved. The long-term value of R&D investment, ROR (rate of return), is used as the decision target by the partners of the alliance. Game models are suggested to inform the decision-making of the R&D alliance. Two cases with different probabilities of industrialisation risks are proposed to demonstrate the different decisions of R&D alliances. The two partners obtain maximal ROR simultaneously under the condition of one case. For the other case, the two partners cannot obtain maximal ROR under the same condition. A dynamic profit-sharing strategy is suggested to manage the R&D alliance. Finally, numerical examples are used to illustrate related issues.

Online publication date: Sat, 03-Sep-2016

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