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Organizational Design of R&D activities

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  • Stefan Ambec

    ()
    (CSEF, Università di Salerno)

  • Michel Poitevin

    (Département de sciences économiques, C.R.D.E., Université de Montréal and CIRANO)

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 organizational structures. In an integrated structure, the firm that markets the innovation also carries out and finances research leading to the innovation. In an independent structure, the firm that markets the innovation buys it from an independent research unit which is financed externally. 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. When development costs are negatively correlated with revenues from the innovation, the integrated structure dominates. The independent structure dominates in the opposite case.

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Bibliographic Info

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 60.

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Date of creation: 01 Jun 2001
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Handle: RePEc:sef:csefwp:60

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  8. 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.
  9. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
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Citations

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Cited by:
  1. Bergemann, D. & Hege, U., 2001. "The Financing of Innovation: Learning and Stopping," Discussion Paper 2001-16, Tilburg University, Center for Economic Research.
  2. Dirk Bergemann & Ulrich Hege, 2002. "The Value of Benchmarking," Cowles Foundation Discussion Papers 1379, Cowles Foundation for Research in Economics, Yale University, revised Oct 2002.
  3. Bruno Amable & Régis Breton & Xavier Ragot, 2002. "Does the "New Economy" Change the Frontiers of the Large Corporation," Recherches économiques de Louvain, De Boeck Université, vol. 68(1), pages 239-255.
  4. Versaevel, Bruno & de Villemeur, Étienne, 2003. "Conflict and Cooperation on R&D Markets," IDEI Working Papers 191, Institut d'Économie Industrielle (IDEI), Toulouse.

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