Due diligence, research joint ventures, and incentives to innovate

Simona Fabrizi () and Steffen Lippert

MPRA Paper from University Library of Munich, Germany

Abstract: The decision to cooperate within R&D joint ventures is often based on `expert advice.' Such advice typically originates in a due diligence process, which assesses the R&D joint venture's profitability, for example, by appraising the achievability of synergies. We show that if the experts who advise the owners considering forming an R&D joint venture are also responsible for R&D efforts, they can have incentives to withhold information about the extent of those synergies. Owners optimally react by reducing the incentives to innovate in low-value projects developed within R&D joint ventures and in high-value projects developed within competing research organizations.

Keywords: Research and development; due diligence; experts' advice; joint venture; synergies; asymmetric information; moral hazard; information withholding (concealing) and revelation (search for similar items in EconPapers)
JEL-codes: D82 D86 L24 L5 O31 O32 O38 (search for similar items in EconPapers)
Date: 2011-09-04
New Economics Papers: this item is included in nep-cta, nep-ino and nep-ppm
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https://mpra.ub.uni-muenchen.de/33207/1/MPRA_paper_33207.pdf original version (application/pdf)

Related works:
Journal Article: Due Diligence, Research Joint Ventures, and Incentives to Innovate (2012)
Working Paper: Due diligence, research joint ventures, and incentives to innovate (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:33207

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