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The management of innovation: Experimental evidence

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  • Kusterer, David J.
  • Schmitz, Patrick W.

Abstract

We report data from a laboratory experiment with 576 participants that was designed to test Aghion and Tirole's (1994a) management of innovation theory which is based on the Grossman–Hart–Moore property rights approach. A research unit and a customer can invest to increase the probability of making an innovation. When the innovation is made, the parties bargain over the division of the revenue. In line with the theoretical predictions, we find that ownership matters for the division of the revenue and the investments. However, communication can mitigate Aghion and Tirole's (1994a) concern that the customer will not relinquish ownership to the cash-constrained research unit.

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  • Kusterer, David J. & Schmitz, Patrick W., 2017. "The management of innovation: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 104(C), pages 706-725.
    • Handle: RePEc:eee:gamebe:v:104:y:2017:i:c:p:706-725
    DOI: 10.1016/j.geb.2017.06.011
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    Cited by:

    1. Schmitz, Patrick W. & Kusterer, David J., 2018. "Government versus Private Ownership of Public Goods: Experimental Evidence," CEPR Discussion Papers 13204, C.E.P.R. Discussion Papers.
    2. Kusterer, David J. & Schmitz, Patrick W., 2020. "Public goods, property rights, and investment incentives: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 514-532.
    3. V. Shestak P. & E. Moreva I. & I. Tyutyunnik G. & В. Шестак П. & Е. Морева Л. & И. Тютюнник Г., 2019. "Финансовое управление инновационной активностью // Financial Management of Innovative Activity," Финансы: теория и практика/Finance: Theory and Practice // Finance: Theory and Practice, ФГОБУВО Финансовый университет при Правительстве Российской Федерации // Financial University under The Government of Russian Federation, vol. 23(6), pages 63-75.
    4. Schmitz, Patrick W., 2017. "Incomplete contracts, shared ownership, and investment incentives," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 153-165.

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    More about this item

    Keywords

    Property rights; Incomplete contracts; Investment incentives; Laboratory experiments;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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