Due diligence, research joint ventures, and incentives to innovate

Simona Fabrizi () and Steffen Lippert

No 1113, Working Papers from University of Otago, Department of Economics

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; expert 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 O3 O31 O32 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2011-12, Revised 2011-12
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.otago.ac.nz/economics/research/otago076671.pdf First version, 2011 (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:otg:wpaper:1113

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