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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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  27. Schmitz, Patrick W., 2001. "The Hold-Up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory," MPRA Paper 12562, University Library of Munich, Germany.
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