Competing or coordinating: IT R&D investment decision making subject to information time lag

Authors:
Tao Yao;John Weyant;Baichun Feng
Affiliations:
Department of Industrial and Manufacturing Engineering, The Pennsylvania State University, University Park, USA 16802;Department of Management Science and Engineering, Stanford University, Stanford, USA 94305;Sheldon B. Lubar School of Business, University of Wisconsin--Milwaukee, Milwaukee, USA 53211
Venue:
Information Technology and Management
Year:
2011

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Abstract

In this paper, we apply a dynamic option-game framework to examine the impact of information time lag on Research and Development (R&D) investment in innovative information technology (IT) industry. We focus on incentives of competition and coordination in R&D. Our results show that shorter information time lag may induce firms to coordinate their investments and avoid over-investment. The threshold of information time lag developed in this paper can facilitate managerial decisions on whether to compete or coordinate R&D investments.