Weak Property Rights and Holdup in R&D
Bharat N. Anand and
Journal of Economics & Management Strategy, 2000, vol. 9, issue 4, 615-642
We study how the sequence of financing of R&D varies according to the ease with which property rights over knowledge can be defined. There are two financiers: a venture capitalist (VC) and a corporation. The knowledge acquired in costly research becomes embodied in the researcher's human capital, and she may hold up the financier and walk away with the project to develop it elsewhere. The main results are: (1) When property rights are strong, research is always funded by the VC, development is performed efficiently, and breakaways from the VC to the corporation are observed in equilibrium. (2) When property rights are weak, projects may be financed by the VC or the corporation, or may remain unfunded. (3) When property rights are weak, no breakaways occur in equilibrium; local spillovers and strong product market competition increase the likelihood that research projects will get funding. (4) The equilibrium sequence of R&D finance need not be first‐best efficient. (5) In equilibrium, and controlling for the strength of property rights, VCs finance projects that are more profitable on average.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:9:y:2000:i:4:p:615-642
Ordering information: This journal article can be ordered from
http://www.blackwell ... ref=1058-6407&site=1
Access Statistics for this article
More articles in Journal of Economics & Management Strategy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().