Organizational Design of R&D Activities

Stefan Ambec and Michel Poitevin

CIRANO Working Papers from CIRANO

Abstract: This paper addresses the question of whether R&D should be carried out by an independent research unit or be produced in-house by the firm marketing the innovation. We define two organizational structures. In an integrated structure, the firm that markets the innovation also carries out and finances research leading to the innovation. In an independent structure, the firm that markets the innovation buys it from an independent research unit which is financed externally. We compare the two structures under the assumption that the research unit has some private information about the real cost of developing the new product. When development costs are negatively correlated with revenues from the innovation, the integrated structure dominates. The independent structure dominates in the opposite case. Cet article analyse la décision de faire de la R&D, soit à l'interne, soit à l'externe. Deux formes organisationnelles sont définies. Dans la structure intégrée, la firme utilisant ou vendant l'innovation finance et effectue la R&D. Dans la structure indépendante, cette même firme achète l'innovation d'une firme de R&D indépendante. On compare les deux types d'organisations sous l'hypothèse que l'unité de R&D possède une information privilégiée sur le coût de développement de l'innovation. Lorsque les coûts de développement sont corrélés négativement avec les bénéfices de l'innovation, la structure intégrée domine. La structure indépendante domine dans le cas contraire.

Keywords: Contract theory; R&D; decentralization; Théorie des contrats; R&D; décentralisation (search for similar items in EconPapers)
Date: 2001-05-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://cirano.qc.ca/files/publications/2001s-38.pdf

Related works:
Working Paper: Organizational Design of R&D Activities (2001)
Working Paper: Organizational Design of R&D Activities (2001)
Working Paper: Organizational Design of R&D activities (2001)
Working Paper: Organizational Design of R & D Activities (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2001s-38

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