Incentives and Forms of Cooperation in Research and Development

Abstract

The paper surveys the main forces affecting the incentive to cooperate in R&D and the effects of cooperation on the incentive to innovate. We consider both a complete and an incomplete contract framework. In addition, we consider several forms of cooperative agreements, and we study in what circumstances one type of cooperation is more likely to emerge more than others. The results suggest that two main forces affecting the incentive to cooperate in R&D are uncertainty and spillovers on R&D activity. In addition, the incentive to cooperate among symmetric firms may be lower or higher than among asymmetric firms, depending on the source of asymmetry. When firms cooperate, in most cases they prefer an RJV to other forms of cooperative agreements. However, due to transaction costs, moral hazard and adverse selection problems in the formation of the venture, other forms of cooperation or competition in R&D may occur. In addition, we consider the effects of uncertainty and spillovers on the size and structure of the coalitions, and the effects of competing research joint ventures on the incentive to innovate. Finally, empirical evidence is surveyed, and the consistence of the latter with the theoretical conclusions is discussed.