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Conference Paper: An empirical analysis of strategic contracts

TitleAn empirical analysis of strategic contracts
Authors
Issue Date2013
Citation
The 11th Annual International Industrial Organization Conference, Boston, MA., 17-19 May 2013. How to Cite?
AbstractThis article investigates the use of strategic contract clauses such as most-favored-customer clauses, rights of first refusal, rights of first offer, first negotiation rights in bio-tech R&D contracts between pharmaceutical firms and bio-tech agents. It is shown that these strategic rights are more likely adopted when potential entry threat from other pharmaceutical firms are larger. This result is consistent with the prediction from the literature: strategic contracts can increase the joint benefit of contracting parties by extracting rent from entrants and/or protect investments by contracting parties. Furthermore, strategic rights and termination rights held by pharmaceutical firms are shown to be substitutes, and the level of substitution is affected by the uncertainty of the R&D activities involved and the previous relationship between contracting parties. These results can be explained by a multi-task theory where bio-tech agents allocate effort between R&D activities specified in contracts and non-contracted R&D activities.
DescriptionSession ID 39: Economics of Contracts
The conference program's website is located at http://editorialexpress.com/conference/IIOC2013/program/IIOC2013.html
Persistent Identifierhttp://hdl.handle.net/10722/188029

 

DC FieldValueLanguage
dc.contributor.authorGuo, Den_US
dc.contributor.authorHua, Xen_US
dc.contributor.authorJiang, K-
dc.date.accessioned2013-08-21T07:25:50Z-
dc.date.available2013-08-21T07:25:50Z-
dc.date.issued2013-
dc.identifier.citationThe 11th Annual International Industrial Organization Conference, Boston, MA., 17-19 May 2013.en_US
dc.identifier.urihttp://hdl.handle.net/10722/188029-
dc.descriptionSession ID 39: Economics of Contracts-
dc.descriptionThe conference program's website is located at http://editorialexpress.com/conference/IIOC2013/program/IIOC2013.html-
dc.description.abstractThis article investigates the use of strategic contract clauses such as most-favored-customer clauses, rights of first refusal, rights of first offer, first negotiation rights in bio-tech R&D contracts between pharmaceutical firms and bio-tech agents. It is shown that these strategic rights are more likely adopted when potential entry threat from other pharmaceutical firms are larger. This result is consistent with the prediction from the literature: strategic contracts can increase the joint benefit of contracting parties by extracting rent from entrants and/or protect investments by contracting parties. Furthermore, strategic rights and termination rights held by pharmaceutical firms are shown to be substitutes, and the level of substitution is affected by the uncertainty of the R&D activities involved and the previous relationship between contracting parties. These results can be explained by a multi-task theory where bio-tech agents allocate effort between R&D activities specified in contracts and non-contracted R&D activities.-
dc.languageengen_US
dc.relation.ispartof11th Annual International Industrial Organization Conference 2013en_US
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.titleAn empirical analysis of strategic contractsen_US
dc.typeConference_Paperen_US
dc.identifier.emailGuo, D: diguo@hku.hken_US
dc.identifier.emailHua, X: xyhua@ust.hk-
dc.identifier.emailJiang, K: jiangkun@hku.hk-
dc.identifier.authorityGuo, D=rp01065en_US
dc.description.naturepostprint-
dc.identifier.hkuros220171en_US
dc.customcontrol.immutablesml 130909-

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