On the contractual governance of research collaborations: Allocating control and intellectual property rights in the shadow of potential termination
This paper investigates the governance design problem of a large company that wants to engage a small and cashless firm into a research collaboration. This analysis reflects the frequently observed collaborations between pharma companies and biotechs, and an actual research contract is assessed to link theory to practice. The governance form refers to the allocation of control rights over the research process and property rights over research output(s), as determined by the initial contract; yet this contract is incomplete. The parties negotiate at a later stage from bargaining positions that depend on the initial choice of the governance, but they also contemplate the possibility that the collaboration will be terminated. By means of a simple model that captures the core aspects of the contractual environment, I answer a key research question: How should governance be designed in the shadow of potential termination to provide the research firm with the incentives to invest in the collaboration? First, it is in the company’s interest to choose a governance form that eliminates the possibility of termination and stabilizes the collaboration whenever possible. Second, if the collaboration cannot be stabilized, the company faces a trade-off between reducing the probability of termination and providing incentives, which is ultimately resolved by making the collaboration highly unstable. Third, property rights and control are substitutes in the governance design: If the company collects more property rights, it must relinquish more control rights.
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.:
- 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.
- Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
- Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
- Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
- Oliver Hart & John Moore, 1988.
"Property Rights and the Nature of the Firm,"
495, Massachusetts Institute of Technology (MIT), Department of Economics.
- Aghion, Philippe & Tirole, Jean, 1994.
"On the Management of Innovation,"
IDEI Working Papers
36, Institut d'Économie Industrielle (IDEI), Toulouse.
- Baker, George P. & Gibbons, Robert & Murphy, Kevin J., 2008.
"Strategic alliances: Bridges between "islands of conscious power","
Journal of the Japanese and International Economies,
Elsevier, vol. 22(2), pages 146-163, June.
- George P. Baker & Robert Gibbons & Kevin J. Murphy, 2008. "Strategic alliances: Bridges between "islands of conscious power"," NBER Chapters, in: Organizational Innovation and Firm Performance, pages 146-163 National Bureau of Economic Research, Inc.
- Lerner, Josh & Merges, Robert P, 1998. "The Control of Technology Alliances: An Empirical Analysis of the Biotechnology Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(2), pages 125-156, June.
- Claudio Panico, 2009. "Employment Relationships in Knowledge-Based Firms: Who Should Have Power?," KITeS Working Papers 009, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised May 2009.
- Kogut, Bruce, 1989. "The Stability of Joint Ventures: Reciprocity and Competitive Rivalry," Journal of Industrial Economics, Wiley Blackwell, vol. 38(2), pages 183-198, December.
- Josh Lerner & Ulrike Malmendier, 2005.
"Contractibility and the Design of Research Agreements,"
NBER Working Papers
11292, National Bureau of Economic Research, Inc.
- Josh Lerner & Ulrike Malmendier, 2010. "Contractibility and the Design of Research Agreements," American Economic Review, American Economic Association, vol. 100(1), pages 214-246, March.
- Raghuram G. Rajan & Luigi Zingales, 1997.
"Power in a Theory of the Firm,"
NBER Working Papers
6274, National Bureau of Economic Research, Inc.
- Rajan, Raghuram G & Zingales, Luigi, 1998. "Power in a Theory of the Firm," CEPR Discussion Papers 1777, C.E.P.R. Discussion Papers.
- Raghuram G. Rajan & Luigi Zingales, "undated". "Power in a Theory of the Firm," CRSP working papers 335, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Arora, Ashish & Gambardella, Alfonso, 2010. "The Market for Technology," Handbook of the Economics of Innovation, Elsevier.
- Ashish Arora & Robert P. Merges, 2004. "Specialized supply firms, property rights and firm boundaries," Industrial and Corporate Change, Oxford University Press, vol. 13(3), pages 451-475, June.
- Philippe Aghion & Jean Tirole, 1994. "The Management of Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1185-1209.
- Ashish Arora & Alfonso Gambardella, 2010. "Ideas for rent: an overview of markets for technology," Industrial and Corporate Change, Oxford University Press, vol. 19(3), pages 775-803, June.
- Reuer, Jeffrey J. & Zollo, Maurizio, 2005. "Termination outcomes of research alliances," Research Policy, Elsevier, vol. 34(1), pages 101-115, February.
When requesting a correction, please mention this item's handle: RePEc:eee:respol:v:40:y:2011:i:10:p:1403-1411. 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.