On the organization of cooperative research and development: Theory and evidence

Abstract

It has become increasingly prevalent that business firms, often rival firms, join forces in cooperative R and D to develop new technologies that they can use in their downstream business. Equity research joint ventures and non-equity co-development are the two major modes of organization, and they differ in how ownership rights over newly developed technologies are assigned. This paper addresses the question of when cooperative R and D should be carried out in a research joint venture as opposed to a co-development program. In a setting of contractual incompleteness, the nature of the downstream business of participating firms is shown to determine the organization of cooperative R and D. Empirical evidence that is consistent with the theoretical analysis is also presented. © 1997 Published by Elsevier Science B.V.