Is Collaboration Good for Innovation?

Abstract

Collaborative agreements intended to facilitate innovation through the acquisition of technological information may have just the opposite effect. While collaboration may increase the ability of firms to innovate, its impact on competition may reduce the incentive. The considerable and inescapable transactions costs of collaboration may also exact their toll on innovation. This paper expresses even more fundamental reservations. Innovation requires information, and firms in competition receive much of this information through informal networks. If information flow through these networks is disrupted by collaborative agreements, then the ability of both collaborating firms and non-collaborating firms to innovate and to compete may be seriously impaired. While the more obvious costs of collaboration have an immediate impact, costs in terms of reduced rate and degree of innovation will not be apparent for some years.