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Contract Enforcement and R&D Investment

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  • Watzinger, Martin
  • Seitz, Michael

Abstract

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.

Suggested Citation

  • Watzinger, Martin & Seitz, Michael, 2013. "Contract Enforcement and R&D Investment," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79773, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc13:79773
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    6. Ortiz, Rodrigo & Fernandez, Viviana, 2022. "Business perception of obstacles to innovate: Evidence from Chile with pseudo-panel data analysis," Research in International Business and Finance, Elsevier, vol. 59(C).
    7. Alam, Ashraful & Uddin, Moshfique & Yazdifar, Hassan, 2019. "Institutional determinants of R&D investment: Evidence from emerging markets," Technological Forecasting and Social Change, Elsevier, vol. 138(C), pages 34-44.
    8. Gideon Ndubuisi & Solomon Owusu, 2022. "Trust, Efficient Contracting and Export Upgrading," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(6), pages 2708-2729, December.
    9. Chuanyi Wang & Jiale Yang & Zhe Cheng & Chaoqun Ni, 2019. "Postgraduate Education of Board Members and R&D Investment—Evidence from China," Sustainability, MDPI, vol. 11(22), pages 1-17, November.
    10. Maskus, Keith E. & Milani, Sahar & Neumann, Rebecca, 2019. "The impact of patent protection and financial development on industrial R&D," Research Policy, Elsevier, vol. 48(1), pages 355-370.
    11. Ming Yi & Yiqian Wang & Modan Yan & Lina Fu & Yao Zhang, 2020. "Government R&D Subsidies, Environmental Regulations, and Their Effect on Green Innovation Efficiency of Manufacturing Industry: Evidence from the Yangtze River Economic Belt of China," IJERPH, MDPI, vol. 17(4), pages 1-17, February.

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    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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