The relationship between the advertising investment and R&D competition strategy for new product

Using a standard model of dynamic R&D competition in patent races, and performing a comparative-static analysis on the firm's profit-maximizing R&D strategy, this paper examines R&D rival and advertising rivalry in the R&D project. The conclusion is that an aggressive advertising by the rival results in the firm scaling back its R&D investment and reducing its own advertising activities. On the other hand, greater R&D spending by the rival also lowers own R&D expenditures and advertising efforts, especially when the probability of own R&D success is low. Finally, we also have two corollaries and a practical example.