Due diligence, research joint ventures, and incentives to innovate
Fabrizi, Simona; Lippert, Steffen
Cite this item:
Fabrizi, S., & Lippert, S. (2011). Due diligence, research joint ventures, and incentives to innovate (Economics Discussion Papers Series No. 1113). University of Otago. Retrieved from http://hdl.handle.net/10523/2067
Permanent link to OUR Archive version:
http://hdl.handle.net/10523/2067
Abstract:
The decision to cooperate within R&D joint ventures is often based on ‘expert advice.’ Such advice typically originates in a due diligence process, which assesses the R&D joint venture’s profitability, for example, by appraising the achievability of synergies. We show that if the experts who advise the owners considering forming an R&D joint venture are also responsible for R&D efforts, they can have incentives to withhold information about the extent of those synergies. Owners optimally react by reducing the incentives to innovate in low-value projects developed within R&D joint ventures and in high-value projects developed within competing research organizations.
Date:
2011-09-01
Publisher:
University of Otago
Series number:
1113
ISSN:
1178-2293
Keywords:
Research and development; due diligence; experts' advice; joint venture; synergies; asymmetric information; moral hazard; information withholding (concealing) and revelation
Research Type:
Discussion Paper
Languages:
English
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