Due diligence, research joint ventures, and incentives to innovate
The decision to cooperate within R&D joint ventures is often based on expert advice. Such advice typically originates in a due diligence process, which assesses the R&D joint venture's profitability, for example, by appraising the achievability of synergies. We show that if the experts who advise the owners considering forming an R&D joint venture are also responsible for R&D efforts, they can have incentives to withhold information about the extent of those synergies. Owners optimally react by reducing the incentives to innovate in low-value projects developed within R&D joint ventures and in high-value projects developed within competing research organizations.
|Date of creation:||Dec 2011|
|Date of revision:||Dec 2011|
|Contact details of provider:|| Postal: P.O. Box 56, Dunedin|
Phone: +64 3 479 8725
Fax: 64 3 479 8171
Web page: http://www.business.otago.ac.nz/econ
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maskin, Eric S & Riley, Joan G, 1985.
"Auction Theory with Private Values,"
American Economic Review,
American Economic Association, vol. 75(2), pages 150-55, May.
- Yannis Caloghirou & Stavros Ioannides & Nicholas S. Vonortas, 2003. "Research Joint Ventures," Journal of Economic Surveys, Wiley Blackwell, vol. 17(4), pages 541-570, 09.
- Paul R. Milgrom & John Roberts, 1985.
"Relying on the Information of Interested Parties,"
Cowles Foundation Discussion Papers
749, Cowles Foundation for Research in Economics, Yale University.
- Marco Celentani & Rosa Loveira, 2006. "A Simple Explanation of the Relative Performance Evaluation Puzzle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(3), pages 525-540, July.
- Cremer, Jacques & McLean, Richard P, 1985. "Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent," Econometrica, Econometric Society, vol. 53(2), pages 345-61, March.
- H.S. Shin, 1994. "News Management and the Value of Firms," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 58-71, Spring.
- Simona Fabrizi & Steffen Lippert, 2007. "On Moral Hazard and Joint R&D," Keele Economics Research Papers KERP 2007/03, Centre for Economic Research, Keele University.
- V. Crawford & J. Sobel, 2010.
"Strategic Information Transmission,"
Levine's Working Paper Archive
544, David K. Levine.
- Goltsman, Maria & Hörner, Johannes & Pavlov, Gregory & Squintani, Francesco, 2009. "Mediation, arbitration and negotiation," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1397-1420, July.
- 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 1293-306, December.
- Rod Falvey & Joanna Poyago-Theotoky & Khemarat Teerasuwannajak, 2006. "Coordination Costs: A Drawback for Research Joint Ventures?," Discussion Paper Series 2006_3, Department of Economics, Loughborough University, revised Feb 2006.
- Leland, Hayne E, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality: Comment," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 485-89, December.
- Subhasish M. Chowdhury & Stephen Martin, 2011. "Innovation Races with the Possibility of Failure," Working Papers 1106, University of Otago, Department of Economics, revised Aug 2011.
- Ivanov, Maxim, 2010. "Communication via a strategic mediator," Journal of Economic Theory, Elsevier, vol. 145(2), pages 869-884, March.
- Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
When requesting a correction, please mention this item's handle: RePEc:otg:wpaper:1113. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Janet Bryant)
If references are entirely missing, you can add them using this form.