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Research Joint Ventures: The Role of Financial Constraints

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  • Philipp Brunner
  • Igor Letina
  • Armin Schmutzler

Abstract

This paper provides a novel theory of research joint ventures for financially constrained firms. When firms choose R&D portfolios, an RJV can help to coordinate research efforts, reducing investments in duplicate projects. This can free up resources, increase the variety of pursued projects and thereby increase the probability of discovering the innovation. RJVs improve innovation outcomes when market competition is weak and external financing conditions are bad. An RJV may increase the innovation probability and nevertheless lower total R&D costs. RJVs that increase innovation also increase consumer surplus and tend to be profitable, but innovation-reducing RJVs also exist. Finally, we compare RJVs to innovation-enhancing mergers.

Suggested Citation

  • Philipp Brunner & Igor Letina & Armin Schmutzler, 2022. "Research Joint Ventures: The Role of Financial Constraints," Papers 2207.04856, arXiv.org, revised Feb 2024.
    • Handle: RePEc:arx:papers:2207.04856
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    1. Brunner, Philipp & Letina, Igor & Schmutzler, Armin, 2024. "Research joint ventures: The role of financial constraints," European Economic Review, Elsevier, vol. 165(C).
    2. Naoto Shirasawa & Yuna Seo, 2025. "The Role of Institutional and Geographic Proximity in Enhancing Creating Shared Value (CSV) Initiatives Within Local Industrial Clusters: A Study of Japanese SMEs," Sustainability, MDPI, vol. 17(6), pages 1-24, March.

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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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