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Cooperation Between Rivals: Informal Know-How Trading


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ABSTRACT
"Informal" know-how trading is the extensive exchange of proprietary
know-how by informal networks of process engineers in rival (and non-rival)
firms. I have observed such know-how trading networks to be very active in the
US steel minimill industry and elsewhere, and they appear to represent a novel
form of cooperative R&D.
When one examines informal know-how trading in the framework of a
"Prisoner's Dilemma", real-world conditions can be specified where this behavior
both does and does not make economic sense from the point of view of
participating firms. Data available to date on the presence and absence of such
trading seem to be roughly in accordance with the predictions of this simple
model.
Although presently documented only as a firm-level phenomenon involving
the trading of proprietary technical know-how, informal know-how trading seems
relevant to (and may currently exist in), many other types of situation. Indeed, it
may be applicable to any situation in which individuals or organizations are
involved in a competition where possession of proprietary know-how represents a
form of competitive advantage.
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