Due diligence, research joint ventures, and incentives to innovate
AbstractThe decision to cooperate within R&D joint ventures is often based on `expert advice.' Such advice typically originates in a due diligence process, which assesses the R&D joint venture's profitability, for example, by appraising the achievability of synergies. We show that if the experts who advise the owners considering forming an R&D joint venture are also responsible for R&D efforts, they can have incentives to withhold information about the extent of those synergies. Owners optimally react by reducing the incentives to innovate in low-value projects developed within R&D joint ventures and in high-value projects developed within competing research organizations.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 33207.
Date of creation: 04 Sep 2011
Date of revision:
Research and development; due diligence; experts' advice; joint venture; synergies; asymmetric information; moral hazard; information withholding (concealing) and revelation;
Other versions of this item:
- Simona Fabrizi & Steffen Lippert, 2012. "Due Diligence, Research Joint Ventures, and Incentives to Innovate," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(4), pages 588-611, December.
- Simona Fabrizi & Steffen Lippert, 2011. "Due diligence, research joint ventures, and incentives to innovate," Working Papers 1113, University of Otago, Department of Economics, revised Dec 2011.
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- L5 - Industrial Organization - - Regulation and Industrial Policy
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-16 (All new papers)
- NEP-CTA-2011-09-16 (Contract Theory & Applications)
- NEP-INO-2011-09-16 (Innovation)
- NEP-PPM-2011-09-16 (Project, Program & Portfolio Management)
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