Open Innovation in a Dynamic Cournot Duopoly

In recent years Open Innovation (OI) processes have been receiving growing attention from the empirical and theoretical economic literature, where a debate is taking place on the aspects of complementarity or substitutability between internal R&D and OI spillover. By means of a differential game approach, we analyze the case of substitutability in an OI setup in a Cournot duopolywhere knowledge spillovers are endogenously determined via the R&D process. The gameproducesmultiple steady states, allowing for an asymmetric solutionwhere a firm may trade off the R&D investment against information absorption from the rival. The technical analysis and the numerical simulations point out that the firmwhich commits to a higher level of OI absorption produces a smaller output and enjoys higher profits than its rival.