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Optimal allocation of ownership rights in dynamic R&D alliances

  • Rosenkranz, Stephanie
  • Schmitz, Patrick W.

We explore the dynamic evolution of property rights regimes in R&D alliances using the incomplete contract approach pioneered by Grossman, Hart and Moore (Hart and Moore, Journal of Political Economy (1990), and Grossman and Hart, Journal of Political Economy (1986)). In contrast to the standard analysis, the productive asset is an excludable public good such as a patent. Moreover, both firms can decide whether to disclose their know-how and invest effort. Know-how that has once been released cannot be concealed later. We characterize different scenarios in which the optimal ownership structure may change over time due to a trade-off between inducing know-how disclosure and ensuring maximum effort.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 43 (2003)
Issue (Month): 1 (April)
Pages: 153-173

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Handle: RePEc:eee:gamebe:v:43:y:2003:i:1:p:153-173
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Rosenkranz, Stephanie & Schmitz, Patrick W, 2001. "Joint Ownership and Incomplete Contracts: The Case of Perfectly Substitutable Investments," CEPR Discussion Papers 2679, C.E.P.R. Discussion Papers.
  2. Aghion, P. & Tirole, J., 1993. "On the Management of Innovation," Working papers 93-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Eric Maskin & Jean Tirole, 1999. "Unforeseen Contingencies and Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 83-114.
  4. Bhattacharya, Sudipto & Glazer, Jacob & Sappington, David E. M., 1992. "Licensing and the sharing of knowledge in research joint ventures," Journal of Economic Theory, Elsevier, vol. 56(1), pages 43-69, February.
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  9. d'Aspremont, Claude & Bhattacharya, Sudipto & Gerard-Varet, Louis-Andre, 1998. "Knowledge as a public good: efficient sharing and incentives for development effort," Journal of Mathematical Economics, Elsevier, vol. 30(4), pages 389-404, November.
  10. Gandal, Neil & Scotchmer, Suzanne, 1993. "Coordinating research through research joint ventures," Journal of Public Economics, Elsevier, vol. 51(2), pages 173-193, June.
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  12. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
  13. Nöldeke, Georg & Schmidt, Klaus M., 1997. "Sequential Investments and Options to Own," CEPR Discussion Papers 1645, C.E.P.R. Discussion Papers.
  14. Rosenkranz, Stephanie & Schmitz, Patrick W., 1999. "Know-how disclosure and incomplete contracts," Economics Letters, Elsevier, vol. 63(2), pages 181-185, May.
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  18. De Fraja, Gianni, 1999. "After You Sir. Hold-Up, Direct Externalities, and Sequential Investment," Games and Economic Behavior, Elsevier, vol. 26(1), pages 22-39, January.
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  23. Oliver Hart, 2001. "Norms and the Theory of the Firm," NBER Working Papers 8286, National Bureau of Economic Research, Inc.
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  25. De Fraja, Giovanni, 1993. "Strategic spillovers in patent races," International Journal of Industrial Organization, Elsevier, vol. 11(1), pages 139-146, March.
  26. Oliver Hart & John Moore, 1999. "Foundations of Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 115-138.
  27. Bruce Kogut, 1991. "Joint Ventures and the Option to Expand and Acquire," Management Science, INFORMS, vol. 37(1), pages 19-33, January.
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