Sustainability Of Implicit Contract Based On Research Joint Ventures

Research joint ventures mainly refer to R&D cooperation between the enterprise and the scientific research institution. Corporation schemes out the innovation project and provides the fund, while the scientific research institution provides the manpower, the equipment and carries out the innovation process The implicit contracts stability is related to the sustainability of the RJVs. Whether the enterprise or scientific research institution to be glad to carry out the implicit contracts rest on their anticipation of profit, the partners will comply with the contract and keep cooperation when all partners agree that profit of complying with the contract is greater than the profit of countering the contract. Although the partners have the incentive to work together beforehand, they may betray the contract for the existence of knowledge spillovers. Controlling the members comply with the contract, R&D cooperation organization urge members to share themselves'exclusiveness knowledge.Taking R&D cooperation between multinational company and expert as example, the thesis examines the choice of implicit contract for such activities: when should a firm hire a technological expert as a temporary employee, transact through consulting spot markets, or engage in a long-term employment or supply relationship with the expert? Putting the model in imperfect Competition market, the payoffs are the result of inside and outside options. Following the model of GHM, there are four possible organizational arrangements: market (M), supply relationship (SR), employment relationship (ER), and spot employment (SE).The model highlights the role of fallback options in sustaining socially efficient implicit contracts. Comparison of long-term employment and supply relationships shows that, contrary to received wisdom, an employment relationship is a less robust arrangement than a supply relationship in the presence of large knowledge spillovers. Nevertheless, the employment relationship is relatively more sustainable when there are complementarities between the parties'cooperation investments.