IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v46y2025i6p3414-3427.html

Contracting Institutions and R&D Collaboration Between Nonrivals in Competitive Industry Equilibrium

Author

Listed:
  • Travis Ng

Abstract

In a duopoly model, one firm has the option to collaborate in R&D with a third party. Although collaboration can expedite innovation, the third party may unintentionally leak the innovation to the rival firm. Engaging in R&D collaboration can make the rival firm anticipate a free ride, which weakens its incentives for R&D spending. The firm can take legal action against the third party in case of information leakage. Strengthening contracting institutions improves the likelihood of success in such cases. In a competitive industry equilibrium, strengthening contracting institutions only sometimes increases R&D collaboration, industry R&D spending, and the innovation rate.

Suggested Citation

  • Travis Ng, 2025. "Contracting Institutions and R&D Collaboration Between Nonrivals in Competitive Industry Equilibrium," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(6), pages 3414-3427, September.
    • Handle: RePEc:wly:mgtdec:v:46:y:2025:i:6:p:3414-3427
    DOI: 10.1002/mde.4536
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.4536
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.4536?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Van Biesebroeck, Johannes & Zhang, Lijun, 2014. "Interdependent product cycles for globally sourced intermediates," Journal of International Economics, Elsevier, vol. 94(1), pages 143-156.
    2. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    3. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 569-600.
    4. Anton, James J & Yao, Dennis A, 1994. "Expropriation and Inventions: Appropriable Rents in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 84(1), pages 190-209, March.
    5. Veugelers, Reinhilde & Cassiman, Bruno, 2005. "R&D cooperation between firms and universities. Some empirical evidence from Belgian manufacturing," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 355-379, June.
    6. Aamir Rafique Hashmi, 2013. "Competition and Innovation: The Inverted-U Relationship Revisited," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1653-1668, December.
    7. Chen, Yongmin & Puttitanun, Thitima, 2005. "Intellectual property rights and innovation in developing countries," Journal of Development Economics, Elsevier, vol. 78(2), pages 474-493, December.
    8. Williamson, Oliver E, 1973. "Markets and Hierarchies: Some Elementary Considerations," American Economic Review, American Economic Association, vol. 63(2), pages 316-325, May.
    9. Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 217-223, December.
    10. Michael D. Whinston, 2003. "On the Transaction Cost Determinants of Vertical Integration," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 19(1), pages 1-23, April.
    11. Easterbrook, Frank H, 1985. "Detrebling Antitrust Damages," Journal of Law and Economics, University of Chicago Press, vol. 28(2), pages 445-467, May.
    12. Ng, Travis, 2014. "Bailing outsourcing," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 983-993.
    13. Lai, Edwin L. -C., 1998. "International intellectual property rights protection and the rate of product innovation," Journal of Development Economics, Elsevier, vol. 55(1), pages 133-153, February.
    14. Masao Nakamura & Masao Nakamura, 2003. "Research alliances and collaborations: Introduction to the special issue," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(2-3), pages 47-49.
    15. Bruce A. Heiman & Jack A. Nickerson, 2004. "Empirical evidence regarding the tension between knowledge sharing and knowledge expropriation in collaborations," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(6-7), pages 401-420.
    16. Michael L. Katz, 1986. "An Analysis of Cooperative Research and Development," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 527-543, Winter.
    17. Pastor, Maite & Sandonis, Joel, 2002. "Research joint ventures vs. cross licensing agreements: an agency approach," International Journal of Industrial Organization, Elsevier, vol. 20(2), pages 215-249, February.
    18. Aamir Rafique Hashmi & Johannes Van Biesebroeck, 2016. "The Relationship between Market Structure and Innovation in Industry Equilibrium: A Case Study of the Global Automobile Industry," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 192-208, March.
    19. Masten, Scott E, 1988. "A Legal Basis for the Firm," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 181-198, Spring.
    20. James J. Anton & Dennis A. Yao, 2002. "The Sale of Ideas: Strategic Disclosure, Property Rights, and Contracting," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 513-531.
    21. Flavio Delbono & Vincenzo Denicolo, 1991. "Incentives to Innovate in a Cournot Oligopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 951-961.
    22. Rosenkranz, Stephanie & Schmitz, Patrick W., 2003. "Optimal allocation of ownership rights in dynamic R&D alliances," Games and Economic Behavior, Elsevier, vol. 43(1), pages 153-173, April.
    23. Essaji, Azim & Fujiwara, Kinya, 2012. "Contracting institutions and product quality," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 269-278.
    24. Alla Lileeva & Johannes Van Biesebroeck, 2013. "Outsourcing When Investments Are Specific And Interrelated," Journal of the European Economic Association, European Economic Association, vol. 11(4), pages 871-896, August.
    25. Arora, Ashish & Fosfuri, Andrea & Gambardella, Alfonso, 2001. "Markets for Technology and Their Implications for Corporate Strategy," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 10(2), pages 419-451, June.
    26. Deeds, David L. & Hill, Charles W. L., 1999. "An examination of opportunistic action within research alliances: Evidence from the biotechnology industry," Journal of Business Venturing, Elsevier, vol. 14(2), pages 141-163, March.
    27. Ng, Travis, 2013. "Information acquisition and institutions: An organizational perspective," Information Economics and Policy, Elsevier, vol. 25(4), pages 301-311.
    28. Yang Song & Wolfram Elsner & Zhiyuan Zhang & Ron Berger, 2020. "Collaborative innovation and policy support: the emergence of trilateral networks," Applied Economics, Taylor & Francis Journals, vol. 52(34), pages 3651-3668, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Czarnitzki, Dirk & Hottenrott, Hanna, 2012. "Collaborative R&D as a strategy to attenuate financing constraints," ZEW Discussion Papers 12-049, ZEW - Leibniz Centre for European Economic Research.
    2. Sudipto Bhattacharya & Sergei Guriev, 2006. "Patents vs. Trade Secrets: Knowledge Licensing and Spillover," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1112-1147, December.
    3. Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
    4. Pol Antràs, 2014. "Grossman–Hart (1986) Goes Global: Incomplete Contracts, Property Rights, and the International Organization of Production," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(suppl_1), pages 118-175.
    5. Silipo, Damiano B., 2008. "Incentives and forms of cooperation in research and development," Research in Economics, Elsevier, vol. 62(2), pages 101-119, June.
    6. Bhattacharya, Sudipto & Guriev, Sergei, 2004. "Knowledge disclosure, patents and optimal organization of research and development," LSE Research Online Documents on Economics 19315, London School of Economics and Political Science, LSE Library.
    7. Karabay, Bilgehan, 2022. "A new dimension in global value chains: Control vs. delegation in input procurement," Journal of International Economics, Elsevier, vol. 137(C).
    8. Eppinger, Peter S. & Kukharskyy, Bohdan, 2017. "Contracting institutions and firm boundaries," University of Tübingen Working Papers in Business and Economics 100, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    9. Müller, Daniel & Schmitz, Patrick W., 2016. "Transaction costs and the property rights approach to the theory of the firm," European Economic Review, Elsevier, vol. 87(C), pages 92-107.
    10. Keith E. Maskus & Lei Yang, 2018. "Domestic patent rights, access to technologies and the structure of exports," Canadian Journal of Economics, Canadian Economics Association, vol. 51(2), pages 483-509, May.
    11. Egger, Peter H. & Erhardt, Katharina & Masllorens, Gerard, 2023. "Backward versus forward integration of firms in global value chains," European Economic Review, Elsevier, vol. 153(C).
    12. Wenlong He & Tony W. Tong & Mingtao Xu, 2022. "How Property Rights Matter to Firm Resource Investment: Evidence from China’s Property Law Enactment," Organization Science, INFORMS, vol. 33(1), pages 293-310, January.
    13. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    14. Hu, Xiaotian & Yin, Xiaopeng, 2025. "Understanding the product structure of exporters: The role of intellectual property protection in export origins," Journal of Asian Economics, Elsevier, vol. 100(C).
    15. Miguel Espinosa, 2021. "Labor Boundaries and Skills: The Case of Lobbyists," Management Science, INFORMS, vol. 67(3), pages 1586-1607, March.
    16. Mark A. Chen & Shuting Sophia Hu & Joanna Wang & Qinxi Wu, 2023. "Can Blockchain Technology Help Overcome Contractual Incompleteness? Evidence from State Laws," Management Science, INFORMS, vol. 69(11), pages 6540-6567, November.
    17. Yu, Zhen & Li, Yuankun & Ouyang, Ziyi, 2021. "Economic policy uncertainty, hold-up risk and vertical integration: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    18. Eppinger, Peter & Kukharskyy, Bohdan, 2021. "Contracting institutions and firm integration around the world," European Economic Review, Elsevier, vol. 137(C).
    19. Ghafele, Roya & Gibert, Benjamin, 2012. "Promoting intellectual property monetization in developing countries : a review of issues and strategies to support knowledge-driven growth," MPRA Paper 40438, University Library of Munich, Germany.
    20. Patrick W. Schmitz, 2006. "Information Gathering, Transaction Costs, and the Property Rights Approach," American Economic Review, American Economic Association, vol. 96(1), pages 422-434, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:46:y:2025:i:6:p:3414-3427. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.