External Ventures: Why Firms Don't Develop All Their Inventions In-house

Russell Thomson () and Elizabeth Webster ()

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: In this paper we consider why firms sometimes choose an external development path for their own inventions, despite the costs of contracting and the risks of opportunistic behaviour and expropriation. We model the probability that firms adopt an external development strategy using survey data from over 2700 Australian inventions. Our results indicate that firms pursue external development strategies in response to perceived project-level risk about the technical feasibility of the invention, especially when suported by confidence in the patent system. Our findings also confirm that small to medium size enterprises, highly leveraged large firms and firms with few co-specialized assets are more likely to pursue an external development strategy.

Keywords: Outsourcing R&D; managing technological risk; licensing innovation (search for similar items in EconPapers)
JEL-codes: O32 O33 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2011-07
New Economics Papers: this item is included in nep-bec, nep-ent, nep-ino, nep-ipr, nep-pr~, nep-ppm, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2011n19

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