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Bargaining Over New Ideas: The Distribution of Rents and the Stability of Innovative Firms

Author

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  • Mariagiovanna Baccara
  • Ronny Razin

Abstract

We develop a theory of the rent distribution and stability of innovative firms. Our theory is based on a model of bargaining over new ideas. The model accounts for the problem of information leakage, namely, the diffusion of information about new ideas among the agents that participate in the bargaining. Our main results draw a link between the strength of intellectual property rights enforcement and the distribution of rents in firms as well as between the size and organization of firms and their stability. Our theory explains why small firms are advantaged in introducing innovation into the market and why spin-outs tend to emerge from large established firms. (JEL: L1, L2, C7) (c) 2007 by the European Economic Association.

Suggested Citation

  • Mariagiovanna Baccara & Ronny Razin, 2007. "Bargaining Over New Ideas: The Distribution of Rents and the Stability of Innovative Firms," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1095-1129, December.
  • Handle: RePEc:tpr:jeurec:v:5:y:2007:i:6:p:1095-1129
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    Citations

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    Cited by:

    1. repec:eee:jetheo:v:171:y:2017:i:c:p:293-315 is not listed on IDEAS
    2. Giacomo A. M. Ponzetto, 2008. "Intellectual property rights and efficient firm organization," Economics Working Papers 1254, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2014.
    3. Aubert, Cécile & Falck, Oliver & Heblich, Stephan, . "Subsidizing National Champions: An Evolutionary Perspective," Chapters in Economics, University of Munich, Department of Economics.
    4. Eraslan, Hülya & Merlo, Antonio, 2017. "Some unpleasant bargaining arithmetic?," Journal of Economic Theory, Elsevier, vol. 171(C), pages 293-315.
    5. Thomas Hellmann & Enrico Perotti, 2011. "The Circulation of Ideas in Firms and Markets," Management Science, INFORMS, vol. 57(10), pages 1813-1826, October.
    6. Emeric Henry & Francisco Ruiz-Aliseda, 2016. "Keeping Secrets: The Economics of Access Deterrence," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 95-118, August.
    7. repec:eee:pubeco:v:152:y:2017:i:c:p:143-153 is not listed on IDEAS
    8. Rao, T.V.S. Ramamohan, 2011. "CES as an Organizational Production Function," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 46(1), pages 69-81.
    9. Leppälä, Samuli, 2013. "Arrow's paradox and markets for nonproprietary information," Cardiff Economics Working Papers E2013/2, Cardiff University, Cardiff Business School, Economics Section.
    10. Herrera, Helios & Reuben, Ernesto & Ting, Michael M., 2017. "Turf wars," Journal of Public Economics, Elsevier, vol. 152(C), pages 143-153.
    11. Mariagiovanna Baccara, 2007. "Outsourcing, information leakage, and consulting firms," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 269-289, March.
    12. Marini, Marco A., 1998. "Earnings, Coalitions and the Stability of the Firm," MPRA Paper 70728, University Library of Munich, Germany, revised 2012.

    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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