Competition in Research and Development: A Theory for Contradictory Predictions

This paper develops reasons for the many seemingly contradictory findings in the literature about competition and research and development (R&D) investment. The theory of R&D competition implies that increases in competitive pressure may increase R&D investment, decrease it, increase it initially but decrease it over greater levels of competitive pressure (an inverted-U relation), decrease it initially but increase it over greater levels (a U relation), or have no effect at all.