Organizational Design of R & D Activities

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Organizational Design of R & D Activities

Author Info

Stefan Ambec (Universite de Montreal)
Michel Poitevin (Universite de Montreal)

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Stefan Ambec

Abstract

This paper addresses the question of whether R&D should be carried out by an independent research unit or be produced in-house by the firm marketing the innovation. We define two contractual structures. In an independent structure, the firm that markets the innovation buys it from an independent research unit which is financed externally. In an integrated structure, the firm that markets the innovation also carries out and finances research leading to the innovation. We compare the two structures under the assumption that the research unit has some private information about the real cost of developing the new product. We find that the integrated structure dominates when an innovation costly to develop is also a less drastic technology or a product less valued by consumers. The independent structure dominates in the opposite case.

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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0190.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:0190

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Paper
- Stefan Ambec & Michel Poitevin, 2001. "Organizational Design of R&D Activities," CIRANO Working Papers 2001s-38, CIRANO. [Downloadable!]
- Ambec, S. & Poitevin, M., 2001. "Organizational Design of R&D Activities," Cahiers de recherche 2001-12, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- AMBEC, Stefan & POITEVIN, Michel, 2001. "Organizational Design of R&D Activities," Cahiers de recherche 2001-12, Universite de Montreal, Departement de sciences economiques. [Downloadable!]
- Stefan Ambec & Michel Poitevin, 2001. "Organizational Design of R&D activities," CSEF Working Papers 60, Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy. [Downloadable!]

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Paul Beaudry & Michel Poitevin, 1995. "Contract Renegotiation: A Simple Framework and Implications for Organization Theory," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 302-35, May. [Downloadable!] (restricted)
Other versions:
- Beaudry, P. & Poitevin, M., 1993. "Contract Renegotiation: A Simple Framework and Implications for Organization Theory," Cahiers de recherche 9332, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
Dearden, James & Ickes, Barry W & Samuelson, Larry, 1990. "To Innovate or Not to Innovate: Incentives and Innovation in Hierarchies," American Economic Review, American Economic Association, vol. 80(5), pages 1105-24, December. [Downloadable!] (restricted)
Other versions:
- Dearden, J. & Ickes, B.W. & Samuelson, L., 1988. "To Innovate Or Not To Innovate: Incentives And Innovation In Hierarchies," Papers 9-88-4, Pennsylvania State - Department of Economics.
- Dearden, J. & Ickes, B.W. & Samuelson, L., 1988. "To Innovate Or Not To Innovate: Incentives And Innovation In Hierarchies," Papers 0-88-1, Pennsylvania State - Department of Economics.
Aghion, Philippe & Tirole, Jean, 1994. "The Management of Innovation," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1185-1209, November. [Downloadable!] (restricted)
Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
Other versions:
- Laffont, J.J. & Martimort, D., 1996. "Collusion Under Asymmetric Information," Papers 95.389, Toulouse - GREMAQ.
Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November. [Downloadable!] (restricted)
Other versions:
- Bengt Holmstrom & Roger B. Myerson, 1981. "Efficient and Durable Decision Rules with Incomplete Information," Discussion Papers 495, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September. [Downloadable!] (restricted)
AGHION, Philippe & TIROLE, Jean, 1994. "On the Management of Innovation," IDEI Working Papers 36, Institut d'Économie Industrielle (IDEI), Toulouse.
Other versions:
- Aghion, P. & Tirole, J., 1993. "On the Management of Innovation," Working papers 93-12, Massachusetts Institute of Technology (MIT), Department of Economics.
Maskin, Eric & Tirole, Jean, 1992. "The Principal-Agent Relationship with an Informed Principal, II: Common Values," Econometrica, Econometric Society, vol. 60(1), pages 1-42, January. [Downloadable!] (restricted)
Tapon, Francis & Cadsby, Charles Bram, 1996. "The optimal organization of research: evidence from eight case studies of pharmaceutical firms," Journal of Economic Behavior & Organization, Elsevier, vol. 31(3), pages 381-399, December. [Downloadable!] (restricted)
Lerner, Josh & Merges, Robert P, 1998. "The Control of Technology Alliances: An Empirical Analysis of the Biotechnology Industry," Journal of Industrial Economics, Blackwell Publishing, vol. 46(2), pages 125-56, June. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

DE VILLEMEUR, Etienne & VERSAEVEL, Bruno, 2003. "Conflict and Cooperation on R&D Markets," IDEI Working Papers 192, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
HEGE, Ulrich & BERGEMANN, Dirk, 2002. "The value of benchmarking," Les Cahiers de Recherche 752, Groupe HEC. [Downloadable!]
Other versions:
- Dirk Bergemann & Ulrich Hege, 2002. "The Value of Benchmarking," Cowles Foundation Discussion Papers 1379, Cowles Foundation, Yale University, revised Oct 2002. [Downloadable!]
Bergemann, D. & Hege, U., 2001. "The financing of innovation : learning and stopping," Discussion Paper 16, Tilburg University, Center for Economic Research. [Downloadable!]
Other versions:
- Dirk Bergemann & Ulrich Hege, 2001. "The Financing of Innovation: Learning and Stopping," Cowles Foundation Discussion Papers 1292R, Cowles Foundation, Yale University, revised Oct 2004. [Downloadable!]
- Dirk Bergemann & Ulrich Hege, 2001. "The Financing of Innovation: Learning and Stopping," Cowles Foundation Discussion Papers 1292, Cowles Foundation, Yale University. [Downloadable!]
- Bergemann, Dirk & Hege, Ulrich, 2001. "The Financing of Innovation: Learning and Stopping," CEPR Discussion Papers 2763, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Dirk Bergemann & Ulrigh Hege, 2005. "The Financing of Innovation: Learning and Stopping," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 719-752, Winter.

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