Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/93906 
Year of Publication: 
2013
Series/Report no.: 
SFB/TR 15 Discussion Paper No. 433
Publisher: 
Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY), München
Abstract: 
Inter-firm R&D collaborations through contractual arrangements have become increasingly popular, but in many cases they are broken up without any joint discovery. We provide a rationale for the breakup date in R&D collaboration agreements. More specifically, we consider a research consortium initiated by a firm A with a firm B. B has private information about whether it is committed to the project or a free-rider. We show that under fairly general conditions, a breakup date in the contract is a (secondbest) optimal screening device for firm A to screen out free-riders. With the additional constraint of renegotiation proofness, A can only partially screen out free-riders: entry by some free-riders makes sure that A does not have an incentive to renegotiate the contract ex post. We also propose empirical strategies for identifying the three likely causes of a breakup date: adverse selection, moral hazard, and project non-viability.
Subjects: 
Optimal R&D contracts
adverse selection
breakup date
R&D collaboration
JEL: 
C72
D82
L20
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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