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Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: The Design of Vertical R&D Collaborations
Author(s): Herbst, Patrick
Walz, Uwe
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Issue Date: Jan-2017
Citation: Herbst P & Walz U (2017) The Design of Vertical R&D Collaborations, Economica, 84 (333), pp. 54-77.
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.
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