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Research joint ventures: the role of financial constraints


Brunner, Philipp; Letina, Igor; Schmutzler, Armin (2024). Research joint ventures: the role of financial constraints. European Economic Review, 165:104742.

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:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Finance
Social Sciences & Humanities > Economics and Econometrics
Uncontrolled Keywords:Innovation, research joint ventures, financial constraints, mergers, intensity of competition, licensing
Scope:Discipline-based scholarship (basic research)
Language:English
Date:1 June 2024
Deposited On:14 Jun 2024 06:06
Last Modified:15 Jun 2024 20:00
Publisher:Elsevier
ISSN:0014-2921
OA Status:Hybrid
Publisher DOI:https://doi.org/10.1016/j.euroecorev.2024.104742
Related URLs:https://www.zora.uzh.ch/id/eprint/219400/
  • Content: Published Version
  • Language: English
  • Licence: Creative Commons: Attribution 4.0 International (CC BY 4.0)