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Allocation of decision rights among two parties with asymmetric bargaining powers in bidirectional open innovation

Author

Listed:
  • Takaya Kubota

    (Tohoku Gakuin University)

  • Shin’ya Okuda

    (Nagoya City University)

Abstract

This study explores the allocation of decision rights between two parties with different bargaining powers in a bidirectional open innovation setting. We introduce the generalized Nash bargaining solution to allow for unequal bargaining power in ex-post negotiation. As a result, we propose that the party with contracting power releases decision rights depending on its bargaining power. In addition, we propose that the best allocation of decision rights for the maximization of innovation value or the realization of efficient innovation depends on bargaining power and is achieved voluntarily. Lastly, we point out that there are cases in which asymmetric ex-post bargaining power leads to collaboration failure. We conclude that ex-post bargaining power plays a crucial role in influencing the allocation of incentives and the outcomes of open innovation.

Suggested Citation

  • Takaya Kubota & Shin’ya Okuda, 2023. "Allocation of decision rights among two parties with asymmetric bargaining powers in bidirectional open innovation," SN Business & Economics, Springer, vol. 3(6), pages 1-17, June.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:6:d:10.1007_s43546-023-00473-w
    DOI: 10.1007/s43546-023-00473-w
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    References listed on IDEAS

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    1. Schmitz, Patrick W., 2013. "Incomplete contracts and optimal ownership of public goods," Economics Letters, Elsevier, vol. 118(1), pages 94-96.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Incomplete contract; Open innovation; Decision rights; Incentive; Bargaining;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • O36 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Open Innovation

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