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Information Sharing and Optimum Financing Mode

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  • G. Chiesa

Abstract

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.

Suggested Citation

  • G. Chiesa, 2003. "Information Sharing and Optimum Financing Mode," Working Papers 488, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:488
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    References listed on IDEAS

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    1. Bhattacharya Sudipto & Chiesa Gabriella, 1995. "Proprietary Information, Financial Intermediation, and Research Incentives," Journal of Financial Intermediation, Elsevier, vol. 4(4), pages 328-357, October.
    2. Grossman, Sanford J & Hart, Oliver D, 1983. "An Analysis of the Principal-Agent Problem," Econometrica, Econometric Society, vol. 51(1), pages 7-45, January.
    3. Katz, Michael L & Shapiro, Carl, 1987. "R&D Rivalry with Licensing or Imitation," American Economic Review, American Economic Association, vol. 77(3), pages 402-420, June.
    4. Bhattacharya, Sudipto & Glazer, Jacob & Sappington, David E. M., 1992. "Licensing and the sharing of knowledge in research joint ventures," Journal of Economic Theory, Elsevier, vol. 56(1), pages 43-69, February.
    5. Hellmann, Thomas, 2002. "A theory of strategic venture investing," Journal of Financial Economics, Elsevier, vol. 64(2), pages 285-314, May.
    6. Claude d'Aspremont & Sudipto Bhattacharya & Louis-Andre Gerard-Varet, 2000. "Bargaining and Sharing Innovative Knowledge," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(2), pages 255-271.
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    Cited by:

    1. Sihua Chen & Qin He & Hua Xiao, 2022. "A study on cross-border e-commerce partner selection in B2B mode," Electronic Commerce Research, Springer, vol. 22(2), pages 1-21, June.
    2. Feranita, Feranita & Kotlar, Josip & De Massis, Alfredo, 2017. "Collaborative innovation in family firms: Past research, current debates and agenda for future research," Journal of Family Business Strategy, Elsevier, vol. 8(3), pages 137-156.

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