Selection Biases in Complementary R&D Projects

26 Pages Posted: 25 Oct 2014

See all articles by Jay Pil Choi

Jay Pil Choi

Yonsei University

Heiko A. Gerlach

University of Queensland - School of Economics

Date Written: Winter 2014

Abstract

This paper analyzes selection biases in the project choice of complementary technologies that are used in combination to produce a final product. In the presence of complementary technologies, patents allow innovating firms to hold up rivals who succeed in developing other system components. This holdā€up makes innovation rewards independent of project difficulties and firms excessively cluster their R&D efforts on a relatively easier technology in order to preemptively claim stakes on component property rights. This selection bias is persistent and robust to several model extensions. Implications for the optimal design of intellectual property rights are discussed.

Suggested Citation

Choi, Jay Pil and Gerlach, Heiko A., Selection Biases in Complementary R&D Projects (Winter 2014). Journal of Economics & Management Strategy, Vol. 23, Issue 4, pp. 899-924, 2014. Available at SSRN: https://ssrn.com/abstract=2514913 or http://dx.doi.org/10.1111/jems.12071

Jay Pil Choi (Contact Author)

Yonsei University ( email )

Seoul
Korea, Republic of (South Korea)

Heiko A. Gerlach

University of Queensland - School of Economics ( email )

Brisbane, QLD 4072
Australia

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