Coordination mechanisms in the development of complementary technologies
It is often the case that the introduction of new products and services requires the development of several distinct complementary technologies. These technologies may be independently developed by different firms. Each firm may possess a technology that has a much greater value when combined with those of the other firms to form a complementary system. The success of such a system hinges to a large extent on the ability of the firms to coordinate their innovation activities. In this paper, we build a simple model to illustrate the incentive coordination issue. We show that independent firms make less effort than an integrated firm. We use case examples to discuss how Mergers and Acquisitions (M&A), equity investments and cross-licensing serve as mechanisms to align incentives. M&A yield optimum effort levels and are often observed. Cross-equity investments tend to encourage greater effort than independent firms. Cross-licensing can be used to alleviate legal concerns when firms develop patentable complementary technologies.
Volume (Year): 1 (2008)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.inderscience.com/browse/index.php?journalID==259|
When requesting a correction, please mention this item's handle: RePEc:ids:ijmnec:v:1:y:2008:i:1:p:44-57. 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: (Darren Simpson)
If references are entirely missing, you can add them using this form.