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The Choice of Organizational Form for Collaborative Innovation

  • Leiponen, Aija
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    It is commonplace for firms to collaborate with others to gain access to technological components for innovation. This paper examines the choice of organizational form for such activities: when should a firm hire a technological expert as a temporary employee, transact through consulting spot markets, or engage in a long-term employment or supply relationship with the expert? Property rights theory is applied to examine the incentives and commitment created by different organization forms when the property rights of knowledge assets are incomplete. The model highlights the role of fallback options in sustaining socially efficient implicit contracts. Comparison of long-term employment and supply relationships shows that, contrary to received wisdom, an employment relationship is a less robust arrangement than a supply relationship in the presence of large knowledge spillovers. Nevertheless, the employment relationship is relatively more sustainable when there are complementarities between the parties’ cooperation investments. Empirical implications for structuring R&D and consulting arrangements are discussed.

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    File URL: http://purl.umn.edu/127230
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    Paper provided by Cornell University, Department of Applied Economics and Management in its series Working Papers with number 127230.

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    Date of creation: Jul 2003
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    Handle: RePEc:ags:cudawp:127230
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    1. Senker, Jacqueline, 1995. "Tacit Knowledge and Models of Innovation," Industrial and Corporate Change, Oxford University Press, vol. 4(2), pages 425-47.
    2. Fleming, Lee & Sorenson, Olav, 2001. "Technology as a complex adaptive system: evidence from patent data," Research Policy, Elsevier, vol. 30(7), pages 1019-1039, August.
    3. Rebecca Henderson & Iain Cockburn, . "Scale, Scope and Spillovers: The Determinants of Research Productivity in Drug Discovery," Working Papers ec25/94, Department of Economics, University of Lancaster.
    4. Helfat, C.E. & Raubitschek, R.S., 2000. "Product Sequencing: Co-Evolution of Knowledge, Capabilities and Products," Papers 00-1, U.S. Department of Justice - Antitrust Division.
    5. Bruce Kogut & Udo Zander, 1993. "Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation," Journal of International Business Studies, Palgrave Macmillan, vol. 24(4), pages 625-645, December.
    6. Teece, David J., 1993. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 22(2), pages 112-113, April.
    7. Johan Hauknes, . "Services in Innovation – Innovation in Services," STEP Report series 199813, The STEP Group, Studies in technology, innovation and economic policy.
    8. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and the Sustainability of Competitive Advantage: Reply," Management Science, INFORMS, vol. 35(12), pages 1514-1514, December.
    9. Cowan, Robin, 2001. "Expert systems: aspects of and limitations to the codifiability of knowledge," Research Policy, Elsevier, vol. 30(9), pages 1355-1372, December.
    10. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and Sustainability of Competitive Advantage," Management Science, INFORMS, vol. 35(12), pages 1504-1511, December.
    11. Creplet, F. & Dupouet, O. & Kern, F. & Mehmanpazir, B. & Munier, F., 2001. "Consultants and experts in management consulting firms," Research Policy, Elsevier, vol. 30(9), pages 1517-1535, December.
    12. Jacques Mairesse & Pierre Mohnen, 2002. "Accounting for Innovation and Measuring Innovativeness: An Illustrative Framework and an Application," American Economic Review, American Economic Association, vol. 92(2), pages 226-230, May.
    13. Rinaldo Evangelista, 2000. "Sectoral Patterns Of Technological Change In Services," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 9(3), pages 183-222.
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