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Joint ventures in patent contests with spillover and the role of strategic budgeting

  • We consider an R&D contest between n firms in the presence of external spillovers. Our analysis focuses on the effects of these knowledge spillovers on joint venture activities between firms. In particular, we are interested in how different budget responsiblities within the research joint venture (RJV) affect profits of firms taking part in the joint venture and profits of their non-cooperating rival firms. Three arrangements for RJVs are analyzed: First, cooperation, in which the firms participating in the joint venture completely share the knowledge they created in the innovation process and each firm has a sovereign budget responsibility. Second, a collusive arrangement in which the participating firms not only share their knowledge but have joint budget responsibilities in the sense that they make all strategic choices cooperatively and maximize joint profits. Third, a hierarchical form, in which the cooperating firms establish a joint headquarter which has strategic budget responsibility in the sense that can strategically subsidize R&D expenditures of its member firms so as to maximize overall RJV profits. We show that the first two arrangements can be mimiced in the hierarchical structure and that a hierarchical structure is optimal if it completely subsidizes its members’ R&D activities. In this case all rival firms are driven out of the contest.

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Metadaten
Author:Peter-J. Jost
URN:urn:nbn:de:hbz:992-opus4-6888
DOI:https://doi.org/10.1016/j.jeconbus.2011.05.003
Publisher:WHU - Otto Beisheim School of Management
Place of publication:Vallendar
Document Type:Working Paper
Language:English
Date of Publication (online):2018/07/03
Release Date:2018/07/03
Tag:Forschung; Gemeinschaftsprojekt; Nebeneffekt; Organisatorische Abbildung; Strategische Haushaltsplanung; Wettbewerb
Contest; Joint venture; Organisational design; Research; Spillover; Strategic budgeting
Page Number:35
Note:
Published in: Journal of Economics and Business, 63(2011)6, pp. 605-637
Institutes:WHU Management Group / Chair of Organization Theory
JEL-Classification:L Industrial Organization / L1 Market Structure, Firm Strategy, and Market Performance
M Business Administration and Business Economics; Marketing; Accounting / M2 Business Economics
Licence (German):Copyright for this publication