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Organizational Design of R&D Activities

  • Stefan Ambec
  • Michel Poitevin

This paper addresses the question of whether R&D should be carried out by an independent research unit or be produced in-house by the firm marketing the innovation. We define two organizational structures. In an integrated structure, the firm that markets the innovation also carries out and finances research leading to the innovation. In an independent structure, the firm that markets the innovation buys it from an independent research unit which is financed externally. We compare the two structures under the assumption that the research unit has some private information about the real cost of developing the new product. When development costs are negatively correlated with revenues from the innovation, the integrated structure dominates. The independent structure dominates in the opposite case. Cet article analyse la décision de faire de la R&D, soit à l'interne, soit à l'externe. Deux formes organisationnelles sont définies. Dans la structure intégrée, la firme utilisant ou vendant l'innovation finance et effectue la R&D. Dans la structure indépendante, cette même firme achète l'innovation d'une firme de R&D indépendante. On compare les deux types d'organisations sous l'hypothèse que l'unité de R&D possède une information privilégiée sur le coût de développement de l'innovation. Lorsque les coûts de développement sont corrélés négativement avec les bénéfices de l'innovation, la structure intégrée domine. La structure indépendante domine dans le cas contraire.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2001s-38.

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Length: 37 pages
Date of creation: 01 May 2001
Date of revision:
Handle: RePEc:cir:cirwor:2001s-38
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