A firm will tend to follow competitors when they increase spending on R&D but will not follow them when they decrease such spending.

Question

Quizplus · Accepted Answer

This statement is true as a firm would perceive that its competitors are investing in research and development to gain a competitive advantage, and hence would tend to increase its own R&D spending to maintain its position. However, if competitors were to decrease R&D spending, the firm would likely perceive it as an opportunity to gain a competitive advantage by maintaining or increasing its own spending on R&D.

A Firm Will Tend to Follow Competitors When They Increase