Partial passive ownership holdings and R&D risk choices in a differentiated duopoly

Mingqing Xing and Tingting Tan

Economic Research-Ekonomska Istraživanja, 2023, vol. 36, issue 2, 2135554

Abstract: This study investigates the R&D risk choices in a differentiated duopoly, in which a firm has partial passive ownership holdings (P.P.O.s) in its rival. Firms perform R&D projects with identical expected outcomes but different risk degrees. It mainly finds that: (1) the P.P.O.s make both firms more willing to take R&D risks; (2) compared with the firm which owns a share of its rival, its partially owned rival is more willing to take R&D risks; (3) for both firms, their private incentive for R&D risk is lower than the social incentive. However, the P.P.O.s may make the private optimum closer to the social optimum.

Date: 2023
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DOI: 10.1080/1331677X.2022.2135554

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