Contractability and the design of research agreements:
Gespeichert in:
| Beteiligte Personen: | , |
|---|---|
| Format: | Buch |
| Sprache: | Englisch |
| Veröffentlicht: |
Cambridge, Mass.
National Bureau of Economic Research
2005
|
| Schriftenreihe: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
11292 |
| Schlagwörter: | |
| Links: | http://papers.nber.org/papers/w11292.pdf |
| Abstract: | We analyze how variations in contractibility affect the design of contracts in the context of biotechnology research agreements. A major concern of firms financing biotechnology research is that the R&D firms might use the funding to subsidize other projects or substitute one project for another. We develop a model based on the property-rights theory of the firm that allows for researchers in the R&D firms to pursue multiple projects. When research activities are non-verifiable, we show that it is optimal for the financing company to obtain the option right to terminate the research agreement while maintaining broad property rights to the terminated project. The option right induces the biotechnology firm researchers not to deviate from the proposed research activities. The contract prevents opportunistic exercise of the termination right by conditioning payments on the termination of the agreement. We test the model empirically using a new data set on 584 biotechnology research agreements. We find that the assignment of termination and broad intellectual property rights to the financing firm occurs in contractually difficult environments in which there is no specifiable lead product candidate. We also analyze how the contractual design varies with the R&D firm's financial constraints and research capacities and with the type of financing firm. The additional empirical results allow us to distinguish the property-rights explanation from alternative stories, based on uncertainty and asymmetric information about the project quality or research abilities. |
| Umfang: | 45, [12] S. graph. Darst. |
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| 490 | 1 | |a National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |v 11292 | |
| 520 | 3 | |a We analyze how variations in contractibility affect the design of contracts in the context of biotechnology research agreements. A major concern of firms financing biotechnology research is that the R&D firms might use the funding to subsidize other projects or substitute one project for another. We develop a model based on the property-rights theory of the firm that allows for researchers in the R&D firms to pursue multiple projects. When research activities are non-verifiable, we show that it is optimal for the financing company to obtain the option right to terminate the research agreement while maintaining broad property rights to the terminated project. The option right induces the biotechnology firm researchers not to deviate from the proposed research activities. The contract prevents opportunistic exercise of the termination right by conditioning payments on the termination of the agreement. We test the model empirically using a new data set on 584 biotechnology research agreements. We find that the assignment of termination and broad intellectual property rights to the financing firm occurs in contractually difficult environments in which there is no specifiable lead product candidate. We also analyze how the contractual design varies with the R&D firm's financial constraints and research capacities and with the type of financing firm. The additional empirical results allow us to distinguish the property-rights explanation from alternative stories, based on uncertainty and asymmetric information about the project quality or research abilities. | |
| 650 | 4 | |a Biotechnology - Research - Finance | |
| 650 | 4 | |a Contracts - Economic aspects | |
| 650 | 4 | |a Research - Finance | |
| 650 | 4 | |a Biotechnische Forschung / Vertragstheorie / Industrielle Forschung / Forschungsfinanzierung / USA | |
| 700 | 1 | |a Malmendier, Ulrike |d 1973- |e Verfasser |0 (DE-588)123423619 |4 aut | |
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| id | DE-604.BV023591440 |
| illustrated | Illustrated |
| indexdate | 2024-12-20T13:23:16Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-016906770 |
| oclc_num | 254626520 |
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| owner | DE-521 DE-19 DE-BY-UBM |
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| physical | 45, [12] S. graph. Darst. |
| publishDate | 2005 |
| publishDateSearch | 2005 |
| publishDateSort | 2005 |
| publisher | National Bureau of Economic Research |
| record_format | marc |
| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Lerner, Joshua 1960- Verfasser (DE-588)124085792 aut Contractability and the design of research agreements Josh Lerner ; Ulrike Malmendier Cambridge, Mass. National Bureau of Economic Research 2005 45, [12] S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 11292 We analyze how variations in contractibility affect the design of contracts in the context of biotechnology research agreements. A major concern of firms financing biotechnology research is that the R&D firms might use the funding to subsidize other projects or substitute one project for another. We develop a model based on the property-rights theory of the firm that allows for researchers in the R&D firms to pursue multiple projects. When research activities are non-verifiable, we show that it is optimal for the financing company to obtain the option right to terminate the research agreement while maintaining broad property rights to the terminated project. The option right induces the biotechnology firm researchers not to deviate from the proposed research activities. The contract prevents opportunistic exercise of the termination right by conditioning payments on the termination of the agreement. We test the model empirically using a new data set on 584 biotechnology research agreements. We find that the assignment of termination and broad intellectual property rights to the financing firm occurs in contractually difficult environments in which there is no specifiable lead product candidate. We also analyze how the contractual design varies with the R&D firm's financial constraints and research capacities and with the type of financing firm. The additional empirical results allow us to distinguish the property-rights explanation from alternative stories, based on uncertainty and asymmetric information about the project quality or research abilities. Biotechnology - Research - Finance Contracts - Economic aspects Research - Finance Biotechnische Forschung / Vertragstheorie / Industrielle Forschung / Forschungsfinanzierung / USA Malmendier, Ulrike 1973- Verfasser (DE-588)123423619 aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 11292 (DE-604)BV002801238 11292 http://papers.nber.org/papers/w11292.pdf kostenfrei Volltext |
| spellingShingle | Lerner, Joshua 1960- Malmendier, Ulrike 1973- Contractability and the design of research agreements National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Biotechnology - Research - Finance Contracts - Economic aspects Research - Finance Biotechnische Forschung / Vertragstheorie / Industrielle Forschung / Forschungsfinanzierung / USA |
| title | Contractability and the design of research agreements |
| title_auth | Contractability and the design of research agreements |
| title_exact_search | Contractability and the design of research agreements |
| title_full | Contractability and the design of research agreements Josh Lerner ; Ulrike Malmendier |
| title_fullStr | Contractability and the design of research agreements Josh Lerner ; Ulrike Malmendier |
| title_full_unstemmed | Contractability and the design of research agreements Josh Lerner ; Ulrike Malmendier |
| title_short | Contractability and the design of research agreements |
| title_sort | contractability and the design of research agreements |
| topic | Biotechnology - Research - Finance Contracts - Economic aspects Research - Finance Biotechnische Forschung / Vertragstheorie / Industrielle Forschung / Forschungsfinanzierung / USA |
| topic_facet | Biotechnology - Research - Finance Contracts - Economic aspects Research - Finance Biotechnische Forschung / Vertragstheorie / Industrielle Forschung / Forschungsfinanzierung / USA |
| url | http://papers.nber.org/papers/w11292.pdf |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT lernerjoshua contractabilityandthedesignofresearchagreements AT malmendierulrike contractabilityandthedesignofresearchagreements |