Revision with unchanged content. In high-tech industries Research and Development (R&D) is the most important origin of competitive advantage. The underlying investment decisions are notably complex. First high-tech industries are highly concentrated such that mutual observation and reactions among competitors need to be taken into account. Secondly the knowledge created through R&D may not only benefit its originator but may spill over to competitors. This book offers novel analyses of four questions. Should competitors follow similar research paths as to maximise knowledge flows or, to the contrary, minimize spillovers through specific paths? What is the optimal mix of R&D aimed to create original innovation and R&D targeted to absorb others’ innovations? Under what circumstances can incumbents use their ability to absorb external R&D as to threaten innovative entrants? Should competing firms share knowledge with a common supplier who may diffuse it? Basic game theory is applied and the book addresses researchers, advanced students, policy-makers and R&D strategists.