The Design of Vertical R&D Collaborations

24 Pages Posted: 7 Dec 2016

See all articles by Patrick Herbst

Patrick Herbst

University of Stirling - Department of Accounting and Finance

Uwe Walz

Goethe University Frankfurt - Institute of Economics; Center For Financial Studies (CFS); Leibniz Institute for Financial Research SAFE

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Date Written: January 2017

Abstract

Suppliers play a major role in firms' innovation processes. We analyse ownership and technology choices in vertical R&D collaborations. Under non‐contractible R&D outcomes, trade‐offs arise between R&D specifically designed towards a manufacturer (increasing investment productivity) and a general technology (hold‐up reduction). Stronger downstream competition shifts optimal ownership towards the supplier and favours contracting over ownership rather than specific performance contracts. Downstream ownership is combined with the specific technology if the supplier's expertise is more pronounced or the specific technology is more productive. Contracts incorporating exit clauses increase the gains from collaborations.

Suggested Citation

Herbst, Patrick and Walz, Uwe, The Design of Vertical R&D Collaborations (January 2017). Economica, Vol. 84, Issue 333, pp. 54-77, 2017, Available at SSRN: https://ssrn.com/abstract=2880989 or http://dx.doi.org/10.1111/ecca.12183

Patrick Herbst (Contact Author)

University of Stirling - Department of Accounting and Finance ( email )

Stirling, Scotland FK9 4LA
United Kingdom

Uwe Walz

Goethe University Frankfurt - Institute of Economics ( email )

Postfach 81
D-60054 Frankfurt
Germany

Center For Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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