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The Market for R&D Failures

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  • Shalem, Roy
  • Trajtenberg, Manuel

Abstract

The informational structure of R&D is characterized by the fact that rms are exposed to more information related to R&D successes of their competitors than to one that reveals their failures. This paper theoretically explores the feasibility of trading knowledge of R&D failures. The implications of constructing a market for R&D failures are substantive, in that they may decrease the effective cost of R&D, shorten the average time to discovery and increase the number of active R&D projects. We present the conditions required for a mutually bene cial trading of R&D failures information between competitors, as well as design trading mechanisms and policy implications that would account for obstacles such as moral hazard, verication, over-investment and private gains.

Suggested Citation

  • Shalem, Roy & Trajtenberg, Manuel, 2009. "The Market for R&D Failures," Foerder Institute for Economic Research Working Papers 275729, Tel-Aviv University > Foerder Institute for Economic Research.
    • Handle: RePEc:ags:isfiwp:275729
    DOI: 10.22004/ag.econ.275729
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    References listed on IDEAS

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    Cited by:

    1. Jing-Yuan Chio & Laura Magazzini & Fabio Pammolli & Massimo Riccaboni, 2012. "The Value of Failures in Pharmaceutical R&D," Working Papers 1/2012, IMT School for Advanced Studies Lucca, revised Jan 2012.
    2. Jing-Yuan Chiou & Laura Magazzini & Fabio Pammolli & Massimo Riccaboni, 2016. "Learning from successes and failures in pharmaceutical R&D," Journal of Evolutionary Economics, Springer, vol. 26(2), pages 271-290, May.

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