Overcoming Innovation Barriers along the Automotive Industry Value Chain – A Framed Experiment

The conditions under which R&D resources are allocated either to individual or collective R&D projects are largely unexplored. We contribute to closing this gap by asking under which conditions firms – each of which occupies a unique position along the automotive industry value chain – may overcome innovation barriers and spend scarce resources for collective R&D projects. We use a framed laboratory experiment to scrutinize the of different situations on the decision to spend the R&D budget for individual or collective R&D projects. The framing originates from a real-world case study of the massive metal forging industry. We identify constellations that support budget spending for collaborative purposes, e.g., sequential decision-making, which also increase the overall welfare, even in the case of unequally distributed R&D budgets.