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Contract Enforcement and R&D Investment

Listed author(s):
  • Watzinger, Martin
  • Seitz, Michael

In this article we study the relation between the quality of contract enforcement and R&D investment across countries and industries. If companies invest successfully in R&D they are open for exploitation by their supplier if supply contracts are not enforceable. This hold-up problem can reduce the incentive to invest in R&D exante. In line with this theoretical idea we find in the empirical analysis that R&D investment increases with the quality of the judicial system. This effect is particularly strong in industries which rely more on contracts to acquire input and in which it is harder to vertically integrate.

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File URL: https://www.econstor.eu/bitstream/10419/79773/1/VfS_2013_pid_273.pdf
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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79773.

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Date of creation: 2013
Handle: RePEc:zbw:vfsc13:79773
Contact details of provider: Web page: http://www.socialpolitik.org/
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