Breaking Up a Research Consortium
Inter-firm R&D collaborations through contractual arrangements have become increasingly popular, but in many cases they are broken up without any joint discovery. We provide a rationale for the breakup date in R&D collaboration agreements. More specifically, we consider a research consortium initiated by a firm A with a firm B. B has private information about whether it is committed to the project or a free-rider. We show that under fairly general conditions, a breakup date in the contract is a (secondbest) optimal screening device for firm A to screen out free-riders. With the additional constraint of renegotiation proofness, A can only partially screen out free-riders: entry by some free-riders makes sure that A does not have an incentive to renegotiate the contract ex post. We also propose empirical strategies for identifying the three likely causes of a breakup date: adverse selection, moral hazard, and project non-viability.
|Date of creation:||14 May 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Geschwister-Scholl-Platz 1, D-80539 Munich, Germany|
Web page: http://www.sfbtr15.de/
More information through EDIRC
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.:
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414.
- Patrick Bolton & Mathias Dewatripont, 2005.
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262025760.
- Ulrike Malmendier & Geoffrey Tate, 2009.
The Quarterly Journal of Economics,
Oxford University Press, vol. 124(4), pages 1593-1638.
- Choi, Jay Pil, 1992. "Cooperative R&D with moral hazard," Economics Letters, Elsevier, vol. 39(4), pages 485-491, August.
- Lee G. Branstetter & Mariko Sakakibara, 2002. "When Do Research Consortia Work Well and Why? Evidence from Japanese Panel Data," American Economic Review, American Economic Association, vol. 92(1), pages 143-159, March.
- Bester, Helmut & Strausz, Roland, 2001. "Contracting with Imperfect Commitment and the Revelation Principle: The Single Agent Case," Econometrica, Econometric Society, vol. 69(4), pages 1077-98, July.
- Dean Karlan & Jonathan Zinman, 2005.
"Observing unobservables: identifying information asymmetries with a consumer-credit field experiment,"
961, Federal Reserve Bank of Chicago.
- Dean Karlan & Jonathan Zinman, 2009. "Observing Unobservables: Identifying Information Asymmetries With a Consumer Credit Field Experiment," Econometrica, Econometric Society, vol. 77(6), pages 1993-2008, November.
- Dean Karlan & Jonathan Zinman, 2004. "Observing unobservables: Identifying information asymmetries with a consumer credit field experiment," Natural Field Experiments 00283, The Field Experiments Website.
- Karlan, Dean S. & Zinman, Jonathan, 2007. "Observing Unobservables: Identifying Information Asymmetries with a Consumer Credit Field Experiment," CEPR Discussion Papers 6182, C.E.P.R. Discussion Papers.
- John Hagedoorn & Geerte Hesen, 2007. "Contract Law and the Governance of Inter-Firm Technology Partnerships - An Analysis of Different Modes of Partnering and Their Contractual Implications," Journal of Management Studies, Wiley Blackwell, vol. 44(3), pages 342-366, 05.
- Michael L. Katz, 1986. "An Analysis of Cooperative Research and Development," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 527-543, Winter.
- Michael D. Ryall & Rachelle C. Sampson, 2009. "Formal Contracts in the Presence of Relational Enforcement Mechanisms: Evidence from Technology Development Projects," Management Science, INFORMS, vol. 55(6), pages 906-925, June.
- 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 1133-37, December.
- d'ASPREMONT, Claude & JACQUEMIN, Alexis, . "Cooperative and noncooperative R&D in duopoly with spillovers," CORE Discussion Papers RP 823, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Kogut, Bruce, 1989. "The Stability of Joint Ventures: Reciprocity and Competitive Rivalry," Journal of Industrial Economics, Wiley Blackwell, vol. 38(2), pages 183-98, December.
- Josh Lerner & Ulrike Malmendier, 2010.
"Contractibility and the Design of Research Agreements,"
American Economic Review,
American Economic Association, vol. 100(1), pages 214-46, March.
- Josh Lerner & Ulrike Malmendier, 2005. "Contractibility and the Design of Research Agreements," NBER Working Papers 11292, National Bureau of Economic Research, Inc.
- Danzon, Patricia M. & Nicholson, Sean & Pereira, Nuno Sousa, 2005.
"Productivity in pharmaceutical-biotechnology R&D: the role of experience and alliances,"
Journal of Health Economics,
Elsevier, vol. 24(2), pages 317-339, March.
- Patricia M. Danzon & Sean Nicholson & Nuno Sousa Pereira, 2003. "Productivity in Pharmaceutical Biotechnology R&D: The Role of Experience and Alliances," NBER Working Papers 9615, National Bureau of Economic Research, Inc.
- Morasch, Karl, 1995. "Moral hazard and optimal contract form for R&D cooperation," Journal of Economic Behavior & Organization, Elsevier, vol. 28(1), pages 63-78, September.
- Pastor, Maite & Sandonis, Joel, 2002. "Research joint ventures vs. cross licensing agreements: an agency approach," International Journal of Industrial Organization, Elsevier, vol. 20(2), pages 215-249, February.
When requesting a correction, please mention this item's handle: RePEc:trf:wpaper:433. 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: (Tamilla Benkelberg)
If references are entirely missing, you can add them using this form.