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The free-rider problem and the optimal duration of research joint ventures: theory and evidence from the Eureka program

Author

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  • MIYAGIWA, Kaz
  • SISSOKO, Amy
  • SONG, Huasheng

Abstract

In a research joint venture (RJV), members' contributions consist mostly of personnel and proprietary technical know-how. Since the quantity and quality of such contributions are difficult to verify, each member has the temptation to free-ride on others' contributions. In this paper we show that a RJV can resolve this free-rider problem by pre-committing to its duration. Our model predicts, among others, that a RJV chasing a higher-cost innovation tends to have a shorter duration. We then utilize data from the European Eureka program to investigate the factors determining the durations of Eureka RJVs. We find the Eureka data consonant with the prediction of our model.

Suggested Citation

  • MIYAGIWA, Kaz & SISSOKO, Amy & SONG, Huasheng, 2015. "The free-rider problem and the optimal duration of research joint ventures: theory and evidence from the Eureka program," Discussion paper series 2015-02, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    • Handle: RePEc:hit:hiasdp:2015-02
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Research joint venture (RJV); Free-rider problem; Unobservable R&D; Collusion; Stability of RJVs;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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