Cooperation in research and development

This dissertation presents three essays on Cooperation in Research and Development. The first essay, Research Joint Ventures and Optimal R&D Policy with Asymmetric Information, derives the optimal R&D policy of the government with respect to cooperation in research and development under the assumption that there is asymmetric information between the government and the industry about important parameters of the R&D process. The second and the third essays, analyze how firms organize cooperation in research and development. In the second essay, The Organization of Research Corporations and Researcher Ability, we explore why firms decide to form a Research Corporation to conduct industrial R&D instead of financing a similar research project internally. The key finding of this essay is that Research Corporations offer researchers greater autonomy than a single firm pursuing an identical research program. As a result, Research Corporations have an advantage over single firms in recruiting high ability researchers. The essay also analyzes the case of the Microelectronics and Computer Technology Corporation (MCC) and confirms the existence of the trade off identified in the theoretical model between control over research projects and researcher ability. The third essay, Influence Activity and the Organization of Research and Development, analyzes the relation between the organizational design of research and development, its effect on the researchers' incentives, and the characteristics of the research project. Because researchers care strongly about their research project, they try to influence the decision by the management in favor of continuing the project, regardless of the value of the project to the firm. The main result of this essay states that whether or not the researcher spends more time influencing the continuation decision in the internal R&D project compared to the research joint venture, depends on the correlation between the signals of the potential partners about the expected profitability of the project. We find that this model is consistent with the observation that research joint ventures seem involved in more basic research projects compared to internal R&D departments, which concentrate on more applied research.