IPRIA Working Paper Series
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Intellectual Property Research Institute of Australia Working Paper No. 11/2005 Repeated Interactions & Contract Structure Evidence from Technology Development Contracts by Micheal D Ryall and Rachelle C Sampson Date: April 2005 Abstract: “Formal contracting addresses the coordination difficulties inherent in inter-firm deals via explicit terms designed to achieve incentive alignment. Alternatively, when firms expect to interact repeatedly, implicit mechanisms may achieve similar results and without the associated costs. Hence, other things equal, we expect firms will rely upon implicit mechanisms whenever possible. Whether firms actually do substitute implicit mechanisms for explicit ones in the presence of repeated interaction is an empirical question that forms the basis of this paper. We study a sample of 52 joint technology development contracts in the telecommunications and microelectronics industries and devise a coding scheme to allow empirical comparison of contract terms. Counter to the traditional intuition, we find that a firm’s contracts are more detailed and more likely to include penalties when it engages in frequent joint development deals (whether with the same or different partners).” Downloads: PDF [525K] |
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