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The free-rider problem and the optimal duration of research joint ventures: theory and evidence from the Eureka program

Author

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  • MIYAGIWA, Kaz
  • SISSOKO, Amy
  • SONG, Huasheng

Abstract

In a research joint venture (RJV), members' contributions consist mostly of personnel and proprietary technical know-how. Since the quantity and quality of such contributions are difficult to verify, each member has the temptation to free-ride on others' contributions. In this paper we show that a RJV can resolve this free-rider problem by pre-committing to its duration. Our model predicts, among others, that a RJV chasing a higher-cost innovation tends to have a shorter duration. We then utilize data from the European Eureka program to investigate the factors determining the durations of Eureka RJVs. We find the Eureka data consonant with the prediction of our model.

Suggested Citation

  • MIYAGIWA, Kaz & SISSOKO, Amy & SONG, Huasheng, 2015. "The free-rider problem and the optimal duration of research joint ventures: theory and evidence from the Eureka program," Discussion paper series 2015-02, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
  • Handle: RePEc:hit:hiasdp:2015-02
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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/27218/1/070_hiasDP15-02.pdf
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    References listed on IDEAS

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    1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-1137, December.
    2. Erkal, Nisvan & Piccinin, Daniel, 2010. "Cooperative R&D under uncertainty with free entry," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 74-85, January.
    3. Roberto Hern·n & Pedro L. MarÌn & Georges Siotis, 2003. "An empirical evaluation of the determinants of Research Joint Venture Formation," Journal of Industrial Economics, Wiley Blackwell, vol. 51(1), pages 75-89, March.
    4. Kogut, Bruce, 1989. "The Stability of Joint Ventures: Reciprocity and Competitive Rivalry," Journal of Industrial Economics, Wiley Blackwell, vol. 38(2), pages 183-198, December.
    5. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    6. Bruno Cassiman & Reinhilde Veugelers, 2002. "R&D Cooperation and Spillovers: Some Empirical Evidence from Belgium," American Economic Review, American Economic Association, vol. 92(4), pages 1169-1184, September.
    7. Mario Cleves & William W. Gould & Roberto G. Gutierrez & Yulia Marchenko, 2010. "An Introduction to Survival Analysis Using Stata," Stata Press books, StataCorp LP, edition 3, number saus3, April.
    8. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-1306, December.
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    11. Shapiro, Carl & Willig, Robert D, 1990. "On the Antitrust Treatment of Production Joint Ventures," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 113-130, Summer.
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    More about this item

    Keywords

    Research joint venture (RJV); Free-rider problem; Unobservable R&D; Collusion; Stability of RJVs;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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