DP2698 Optimal Allocation of Ownership Rights in Dynamic R&D Alliances
|Author(s):||Stephanie Rosenkranz, Patrick W. Schmitz|
|Publication Date:||February 2001|
|Keyword(s):||Incomplete Contracts, Partnerships, Property Rights, R&D Alliances|
|JEL(s):||L14, L22, O32|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=2698|
We explore the dynamic evolution of property rights regimes in R&D alliances using the incomplete contract approach pioneered by Grossman, Hart and Moore (Hart and Moore, Journal of Political Economy (1990), and Grossman and Hart, Journal of Political Economy (1986)). In contrast to the standard analysis, the productive asset is an excludable public good such as a patent. Moreover, both firms can decide whether to disclose their know-how and invest effort. Know-how that has once been released cannot be concealed later. We characterize different scenarios in which the optimal ownership structure may change over time due to a trade-off between inducing know-how disclosure and ensuring maximum effort.