Incentive for innovation and the optimal allocation of patents

2017 ◽  
Vol 42 (4) ◽  
pp. 692-707 ◽  
Author(s):  
Kojun Hamada
Keyword(s):  
Property Rights ◽  
Ownership Structure ◽  
Optimal Allocation ◽  
Ownership Structures ◽  
Specific Investment ◽  
Specific Investments ◽  
Ex Post ◽  
Ex Ante ◽  
Joint Ownership

This article theoretically investigates how different ownership structures of patents affect ex ante and ex post incentives for innovation by applying a property rights approach. We explore a model in which two research laboratories invest in R&D to obtain an innovative patent, and after successfully obtaining the patent they determine an ownership structure for the patent. The two parties consider how the determined patent ownership would affect their noncontractible relation-specific investments for commercialisation. We demonstrate that joint ownership of a patent between two parties is optimal. More concretely, if a selfish (altruistic) relation-specific investment is more important than an altruistic (selfish) investment, a joint ownership with no (bilateral) veto is optimal to maximise the joint value. Moreover, when both parties do not commit themselves to joint ownership in advance, they have greater incentive to invest in R&D than committing, even if they understand that joint ownership is desirable ex post.

scholarly journals Partner Uncertainty and the Dynamic Boundary of the Firm

2017 ◽  
Vol 9 (4) ◽  
pp. 277-302 ◽  
Author(s):  
Thomas Hellmann ◽  
Veikko Thiele
Keyword(s):  
Asset Specificity ◽  
The Other ◽  
Trade Off ◽  
Specific Investments ◽  
Dynamic Boundary ◽  
Ex Post ◽  
Ex Ante

We develop a new theory of the dynamic boundary of the firm where asset owners may want to change partners ex post. We identify a fundamental trade-off between (i) a “displacement externality” under non-integration, where a partner leaves a relationship even though his benefit is worth less than the loss to the displaced partner, and (ii) a “retention externality” under integration, where a partner inefficiently retains the other. With more asset specificity, displacement externalities matter more and retention externalities less, so that integration becomes more attractive. Wealth can resolve ex post inefficient partner arrangements, but may weaken ex ante incentives for specific investments. (JEL D21, D23, D25, D62, D86, G31)

scholarly journals Entrepreneurial Stewardship: Why Some Profits Should Be Used to Benefit Others

2020 ◽  
Vol 30 (4) ◽  
pp. 525-551 ◽  
Author(s):  
Jooho Lee
Keyword(s):  
Property Rights ◽  
Social Welfare ◽  
Moral Obligation ◽  
Market Process ◽  
Market Participants ◽  
Welfare Maximization ◽  
Social Welfare Maximization ◽  
Ex Post ◽  
Ex Ante ◽  
The Difference

ABSTRACTEntrepreneurs should act as stewards of entrepreneurial rent. Entrepreneurial rent is the difference between the ex post value of a venture and its ex ante costs. It is the result of competition among buyers and sellers within the market process rather than the sole efforts of the entrepreneur. As a result, entrepreneurs should allocate entrepreneurial rent for the benefit of other market participants rather than consuming it for themselves. The moral obligation to steward entrepreneurial rent is consistent with traditional bases of property rights and the norm of social welfare maximization, and it applies to corporations and their shareholders, as well as individual entrepreneurs.

Information Gathering, Transaction Costs, and the Property Rights Approach

2006 ◽  
Vol 96 (1) ◽  
pp. 422-434 ◽  
Author(s):  
Patrick W Schmitz
Keyword(s):  
Property Rights ◽  
Private Information ◽  
Transaction Cost Economics ◽  
Investment Decision ◽  
Theory Of The Firm ◽  
Rent Seeking ◽  
Information Gathering ◽  
Investment Incentives ◽  
Ownership Structures ◽  
Ex Post

The property rights approach to the theory of the firm suggests that ownership structures are chosen in order to provide ex ante investment incentives, while bargaining is ex post efficient. In contrast, transaction cost economics emphasizes ex post inefficiencies. In the present paper, a party may invest and acquire private information about the default payoff that it can realize on its own. Inefficient rent seeking can overturn prominent implications of the property rights theory. In particular, ownership by party B may be optimal, even though only the indispensable party A makes an investment decision.

scholarly journals Reciprocity and Veto Power in Relation-Specific Investments: An Experimental Study

2020 ◽  
Vol 12 (10) ◽  
pp. 4027 ◽  
Author(s):  
Kaiming Zheng ◽  
Xiaoyuan Wang ◽  
Debing Ni ◽  
Yang Yang
Keyword(s):  
Information Disclosure ◽  
Social Preference ◽  
Investment Decisions ◽  
Veto Power ◽  
Organizational Sustainability ◽  
Specific Investment ◽  
Related Information ◽  
Specific Investments ◽  
Ex Post ◽  
Sustainability Theory

Relation-specific investments are usually associated with great risk. Investors, afraid of being held up, are likely to invest too little, endangering both financial and organizational sustainability. Theory suggests that relation-specific investment decisions are mainly affected by potential ex-post bargaining, while experimental evidence shows social-preference-driven thinking affects both investors’ and investees’ behavior. We decompose an experimental hold-up game to identify the effect of reciprocity and the effect of veto power on investees’ transfers. In addition, we investigate the effects of corresponding information disclosures on investors’ performance as possible behavioral remedies to the hold-up problem. We find strong evidence of the effect of reciprocity and reciprocity-related information significantly lower investors’ suboptimal investment. Investors underestimate the effect of reciprocity without related information disclosure. In contrast, we find little evidence of the effect of ex-post veto power on investment decisions. Our results imply that reciprocity-related information disclosure is helpful in promoting both financial and organizational sustainability.

Political Activism and the Provision of Dynamic Incentives: Growing the Pie in the Battle for Redistribution

2021 ◽  
Author(s):  
Antoine Camous ◽  
Russell Cooper
Keyword(s):  
Capital Accumulation ◽  
Optimal Allocation ◽  
Political Influence ◽  
Political Activism ◽  
Income Taxes ◽  
Human Capital Accumulation ◽  
Dynamic Setting ◽  
Ex Post ◽  
Ex Ante

Abstract This paper studies the determination of income taxes in a dynamic setting with human capital accumulation. The goal is to understand the factors that support an outcome without complete redistribution, given a majority of relatively poor agents and the inability to commit to future taxes. All agents agree ex ante that limiting tax and transfers is beneficial but a majority favors large redistribution, ex post, at the time of the vote. In a political influence game, group activism limits the support for expropriatory taxation and preserves incentives. In some cases, the outcome corresponds to the optimal allocation under commitment.

Conflict Management and Outcomes in Franchise Relationships: The Role of Regulation

2013 ◽  
Vol 50 (5) ◽  
pp. 577-589 ◽  
Author(s):  
Kersi D. Antia ◽  
Xu (Vivian) Zheng ◽  
Gary L. Frazier
Keyword(s):  
Conflict Management ◽  
Ownership Structure ◽  
Regulatory Oversight ◽  
Trade Off ◽  
Ex Post ◽  
Ex Ante ◽  
Archival Database ◽  
The Impact ◽  
Good Cause

Franchise relationships are prone to conflict. To safeguard the rights of individual franchisees, several states have legislated greater franchisor disclosure (registration law) ex ante and/or franchisor “termination for good cause” (relationship law) ex post. The impact of regulatory oversight on franchisor–franchisee conflict, however, remains unclear. Relying on agency theory arguments, the authors first assess the influence of the regulatory context, both by itself and in combination with the franchise ownership structure, on the incidence of litigated conflict. Conditional on litigation, they also predict the impact of franchise regulation on both the parties’ litigation initiation and resolution choices and the resulting outcomes. The authors test the hypotheses using a unique multisource archival database of 411 instances of litigation across 75 franchise systems observed over 17 years. The results indicate that the regulatory context, by itself as well as in combination with the franchise ownership structure, significantly shapes parties’ conflict management choices. The authors also find evidence of a trade-off between prevailing in the particular conflict and achieving franchise system growth objectives.

scholarly journals The efficiency of the Italian preventive agreement: a legal, economic and organizational perspective

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Angelo Paletta ◽  
Genc Alimehmeti
Keyword(s):  
Ownership Structure ◽  
Design Methodology ◽  
Original Data ◽  
Bankruptcy Law ◽  
Debt Structure ◽  
Content Type ◽  
Ex Post ◽  
Organizational Perspective ◽  
Ex Ante ◽  
Virtuous Behavior

Purpose This paper aims to analyze the ex ante and ex post economic efficiency of the preventive agreement (concordato preventivo) or composition with creditors as defined by the Italian Bankruptcy Law. This study examines four possible outcomes of the procedure: homologation (confirmation); the degree of dissent/consent of creditors; the revocation, admissibility or inadmissibility; the declaration of the company bankruptcy in preventive agreement. Design/methodology/approach This paper uses data from 728 Italian companies which filed for preventive agreement in 2016. In reference to each of the four possible outcomes, this study applies nine logit regressions to analyze the effects of a series of efficiency variables ex ante (corporate-based drivers) and ex post (procedure-based drivers). Findings Results show the relevance of the debt structure, ownership structure and virtuous behavior, corporate governance and management systems, as well as effectivity of the court control on the preventive agreement outcome. Originality/value This paper draws on original data of bankruptcy in Italy and gives empirical evidence of the ex ante and ex post factors on the outcomes of the preventive agreement.

scholarly journals Knowledge as Property Rights Under the Ratchet Effect of Innovation

2019 ◽  
Vol 18 (5) ◽  
pp. 2677-2714 ◽  
Author(s):  
Teck Yong Tan
Keyword(s):  
Asymmetric Information ◽  
Property Rights ◽  
Incomplete Contracts ◽  
Ratchet Effect ◽  
Ex Post ◽  
Private Knowledge ◽  
Ex Ante ◽  
Information Rent ◽  
Early Production ◽  
Innovation Incentive

Abstract This paper studies how reduced oversight creates an incentive for process innovation. With incomplete contracts, tight monitoring of workers creates a ratchet effect of innovation. Under reduced oversight, a worker accrues private knowledge about his innovation, which serves as a substitute for its inalienable property rights. The resulting asymmetric information generates an information rent for the worker, which feeds back as an innovation incentive ex ante. A weak early production incentive is required to complement it. Innovations are generally underutilized ex post, and mildly successful innovations are not distinguished from failed innovation attempts.

Capital Structure Along the Supply Chain: How Does Customer Leverage Affect Supplier Leverage Decisions?

2017 ◽  
Vol 07 (04) ◽  
pp. 1750014
Author(s):  
Yongqiang Chu ◽  
Liying Wang
Keyword(s):  
Supply Chain ◽  
Capital Structure ◽  
Bargaining Power ◽  
Customer Relationship ◽  
Bargaining Theory ◽  
Specific Investment ◽  
Investment Theory ◽  
Specific Investments ◽  
Ex Ante ◽  
The Relationship

The bargaining theory of capital structure implies that when firms raise their leverage, their suppliers will raise their own leverage in response, so as to maintain strength in negotiations with important customers. In contrast, the theory of firm-specific investments implies that when a customer raises its leverage, a firm will respond by lowering its own leverage to minimize the risk of bankruptcy. We test these theories by examining the relationship between the leverage decisions of suppliers and customers. We find that a firm’s leverage is positively associated with its customer’s leverage. Moreover, consistent with the bargaining theory, we find that the positive leverage relationship is stronger if the customer has a higher ex-ante bargaining power. We also find some support for the relation-specific investment theory of capital structure in that the positive leverage relationship is weaker if the supplier–customer relationship requires more relation-specific investments.

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