Organizational Design of R&D Activities

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: This paper addresses the question of whether R&D should be carried out by an independent research unit or be produced in-house by the firm marketing the innovation. We define two organizational structures. In an integrated structure, the firm that markets the innovation also carries out and finances research leading to the innovation. In an independent structure, the firm that markets the innovation buys it from an independent research unit which is financed externally. We compare the two structures under the assumption that the research unit has some private information about the real cost of developing the new product. When development costs are negatively correlated with revenues from the innovation, the integrated structure dominates. The independent structure dominates in the opposite case.

Keywords: contract theory; R&D; decentralization (search for similar items in EconPapers)
JEL-codes: C30 C32 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://hdl.handle.net/1866/352 (application/pdf)

Related works:
Working Paper: Organizational Design of R&D Activities (2001)
Working Paper: Organizational Design of R&D Activities (2001)
Working Paper: Organizational Design of R&D activities (2001)
Working Paper: Organizational Design of R & D Activities (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montde:2001-12

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