Co-development ventures: Optimal time of entry and profit-sharing
We find the optimal time for entering a joint venture by two firms, and the optimal linear contract for sharing the profits. We consider risk-sharing, timing-incentive and asymmetric decisions contract designs. If the firms are risk-neutral and the cash payments are allowed, all three designs are equivalent. With risk aversion, the optimal contract parameters may vary significantly across the three designs and across varying levels of risk aversion. We also analyze a dataset of joint biomedical ventures, in which, in agreement with our theoretical predictions, both royalty and cash payments are mostly increasing in the smaller firm's experience, and the time of entry happens sooner for more experienced small firms.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Patrick Bolton & Mathias Dewatripont, 2005.
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262025760, January.
- Mathias Dewatripont & Patrick Bolton, 2005. "Contract theory," ULB Institutional Repository 2013/9543, ULB -- Universite Libre de Bruxelles.
- Michel A. Habib & Pierre Mella-Barral, 2007. "The Role of Knowhow Acquisition in the Formation and Duration of Joint Ventures," Review of Financial Studies, Society for Financial Studies, vol. 20(1), pages 189-233, January.
- Michel Habib & Pierre Mella-Barral, 2003. "The Role of Knowhow Acquisition in the Formation and Duration of Joint Ventures," Working Papers hal-00597770, HAL.
- Pierre Mella-Barral & M. A. Habib, 2007. "The Role of Knowhow Acquisition in the Formation and Duration of Joint Ventures," Post-Print halshs-00126775, HAL.
- Sean Nicholson, 2005. "Biotech-Pharmaceutical Alliances as a Signal of Asset and Firm Quality," The Journal of Business, University of Chicago Press, vol. 78(4), pages 1433-1464, July.
- Sean Nicholson & Patricia M. Danzon & Jeffrey S. McCullough, 2002. "Biotech-Pharmaceutical Alliances as a Signal of Asset and Firm Quality," NBER Working Papers 9007, National Bureau of Economic Research, Inc.
- Nancy T. Gallini & Brian D. Wright, 1990. "Technology Transfer under Asymmetric Information," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 147-160, Spring.
- Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 707-727.
- Lambrecht, Bart & Perraudin, William, 2003. "Real options and preemption under incomplete information," Journal of Economic Dynamics and Control, Elsevier, vol. 27(4), pages 619-643, February.
- Cvitanic Jaksa & Wan Xuhu & Zhang Jianfeng, 2008. "Principal-Agent Problems with Exit Options," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-43, October.
- Bruce Kogut, 1991. "Joint Ventures and the Option to Expand and Acquire," Management Science, INFORMS, vol. 37(1), pages 19-33, January.
- Raphael Amit & Lawrence Glosten & Eitan Muller, 1990. "Entrepreneurial Ability, Venture Investments, and Risk Sharing," Management Science, INFORMS, vol. 36(10), pages 1233-1246, October.
- Lambrecht, Bart M., 2004. "The timing and terms of mergers motivated by economies of scale," Journal of Financial Economics, Elsevier, vol. 72(1), pages 41-62, April.
- Arvids A. Ziedonis, 2007. "Real Options in Technology Licensing," Management Science, INFORMS, vol. 53(10), pages 1618-1633, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:35:y:2011:i:10:p:1710-1730. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.