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Selection Biases in Complementary R&D Projects

  • Jay Pil Choi
  • Heiko Gerlach

This paper analyzes selection biases in the project choice of complementary technologies that are used in combination to produce a final product. In the presence of complementary technologies, patents allow innovating firms to hold up rivals who succeed in developing other system components. This hold-up potential induces firms to preemptively claim stakes on component property rights and excessively cluster their R&D efforts on a relatively easier technology. This selection bias is persistent and robust to several model extensions. Implications for the optimal design of intellectual property rights are discussed. We also analyze selection biases that arise when firms differ in research capabilities.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3425.

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Date of creation: 2011
Date of revision:
Handle: RePEc:ces:ceswps:_3425
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  1. Carl Shapiro, 2006. "Prior User Rights," American Economic Review, American Economic Association, vol. 96(2), pages 92-96, May.
  2. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science.
  3. Sudipto Bhattacharya and Dilip Mookherhee., 1984. "Portfolio Choice in Research and Development," Research Program in Finance Working Papers 147, University of California at Berkeley.
  4. d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "On Hotelling's "Stability in competition"," CORE Discussion Papers RP 385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. repec:oup:qjecon:v:94:y:1980:i:2:p:429-36 is not listed on IDEAS
  6. James H. Cardon & Dan Sasaki, 1996. "Pre-emptive Search and R&D Clustering," Discussion Papers 96-21, University of Copenhagen. Department of Economics.
  7. Fershtman, C. & Kamien, M.I., 1991. "Cross Licensing of Complementary Technologies," Papers 1-91, Tel Aviv.
  8. Pankaj Tandon, 1983. "Rivalry and the Excessive Allocation of Resources to Research," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 152-165, Spring.
  9. repec:oup:qjecon:v:93:y:1979:i:3:p:395-410 is not listed on IDEAS
  10. Heiko A. Gerlach & Thomas Rønde & Konrad Stahl, 2005. "PROJECT CHOICE AND RISK IN R&D -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 53(1), pages 53-81, 03.
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