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Outsourcing, Contracts and Innovation Networks


Gianmarco I.P. Ottaviano


Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation

Alireza Naghavi


University of Bologna - Department of Economics
May 2006

CEPR Discussion Paper No. 5681

Abstract:     
We study the decision of firms between vertical integration and outsourcing in a dynamic setting with product innovation. In so doing, we model an industry in which R&D is performed by independent research labs and outsourcing production requires complementary upstream and downstream inventions. In the presence of search friction and incomplete outsourcing contracts, we show that the ex-post bargaining power of upstream and downstream parties at the production stage feeds back to R&D incentives, thus affecting the emergence and the performance of labs specialized in complementary inventions.

Number of Pages in PDF File: 32

Keywords: Innovation, incomplete contracts, outsourcing

JEL Classification: F12, F23

working papers series


Date posted: June 22, 2006  

Suggested Citation

Ottaviano, Gianmarco I.P. and Naghavi, Alireza, Outsourcing, Contracts and Innovation Networks (May 2006). CEPR Discussion Paper No. 5681. Available at SSRN: http://ssrn.com/abstract=911282

Contact Information

Gianmarco I.P. Ottaviano (Contact Author)
Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation ( email )
Via Gobbi 5
Milan, 20136
Italy
Alireza Naghavi
University of Bologna - Department of Economics ( email )
Piazza Scaravilli 2
Bologna, 40126
Italy
HOME PAGE: http://www2.dse.unibo.it/naghavi
Feedback to SSRN (Beta)


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