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INFORMATION SHARING AND OPTIMUM FINANCING MODE
Author(s) -
CHIESA GABRIELLA
Publication year - 2005
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2005.00424.x
Subject(s) - finance , information asymmetry , agency (philosophy) , mode (computer interface) , product (mathematics) , information sharing , economics , business , institution , principal–agent problem , financial institution , industrial organization , microeconomics , corporate governance , philosophy , geometry , mathematics , epistemology , computer science , political science , law , operating system
Within a setting where an established firm (incumbent) and a new venture engage in research and development (R&D) and compete in the product market, we analyze R&D cooperation and the optimum financing mode. We show that if an equilibrium is one where firms cooperate, then financing is provided by the incumbent. Cooperation is more likely in organizations where agency problems are less severe, e.g. family firms, and the riskier R&D. If the R&D output is patentable, cooperation is implemented ex post via licensing and the optimum financing mode has financing provided by a pure financial institution.