Resource Allocation Among Competing Innovators

Many innovative products are designed to satisfy the demand of specific target consumers; thus, innovators will inevitably compete with each other in product market. We investigate how a profit-maximizing principal should properly allocate her limited resources support innovations multiple potentially competing innovators. find that, as available increase, optimal diversification investment may first increase and then decrease. This interesting nonmonotone pattern is driven by trade-off between risk innovation failure rent dissipation because competition. Using this framework, we also analyze nonprofit seeking maximize total number successful innovations, probability at least one innovator succeeding, consumer surplus, social welfare. A tends invest more diversely compared for-profit counterpart. paper was accepted Sridhar Tayur, entrepreneurship innovation.