R&D organization and technology transfer

We use a duopoly to show how the possibility of licensing ex post R&D affects the decision on R&D organization. We show that whether licensing ex post R&D affects the incentive for doing cooperative R&D depends on the nature of cooperative R&D. If the firms do cooperative R&D to avoid duplication in R&D process then the possibility of licensing ex post R&D may influence the decision on R&D organization provided one firm behaves like a Stackelberg leader in the product market. If the firms behave like Cournot duopolists then the possibility of licensing ex post R&D can influence the decision on R&D when the firms do cooperative R&D to share the cost of doing R&D. In the course of analysis, we show the implication of horizontal product differentiation on the R&D organization and technology licensing. Further, we show the importance of monetary transfer under cooperative R&D.