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Research joint ventures: the role of financial constraints


Brunner, Philipp; Letina, Igor; Schmutzler, Armin (2023). Research joint ventures: the role of financial constraints. Working paper series / Department of Economics 416, University of Zurich.

Abstract

This paper provides a novel theory of research joint ventures for financially constrained firms. When firms choose R&D portfolios, an RJV can help to coordinate research efforts, reducing investments in duplicate projects. This can free up resources, increase the variety of pursued projects and thereby increase the probability of discovering the innovation. RJVs improve innovation outcomes when market competition is weak or external financing conditions are bad. An RJV may increase the innovation probability and nevertheless lower total R&D costs. RJVs that increase innovation also increase consumer surplus and tend to be profitable, but innovation-reducing RJVs also exist. Finally, we compare RJVs to innovation-enhancing mergers.

Abstract

This paper provides a novel theory of research joint ventures for financially constrained firms. When firms choose R&D portfolios, an RJV can help to coordinate research efforts, reducing investments in duplicate projects. This can free up resources, increase the variety of pursued projects and thereby increase the probability of discovering the innovation. RJVs improve innovation outcomes when market competition is weak or external financing conditions are bad. An RJV may increase the innovation probability and nevertheless lower total R&D costs. RJVs that increase innovation also increase consumer surplus and tend to be profitable, but innovation-reducing RJVs also exist. Finally, we compare RJVs to innovation-enhancing mergers.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:L13, L24, O31
Uncontrolled Keywords:Innovation, research joint ventures, financial constraints, mergers, intensity of competition, licensing
Scope:Discipline-based scholarship (basic research)
Language:English
Date:July 2023
Deposited On:13 Jul 2022 09:22
Last Modified:06 Mar 2024 14:37
Series Name:Working paper series / Department of Economics
Number of Pages:47
ISSN:1664-7041
Additional Information:Revised version
OA Status:Green
Other Identification Number:merlin-id:22559
  • Content: Published Version
  • Language: English
  • Description: Version July 2022
  • Content: Updated Version
  • Language: English
  • Description: Revised version January 2023
  • Content: Updated Version
  • Language: English
  • Description: Revised version July 2023