Pastor, M. and J. Sandonís
International Journal of Industrial Organization – 20 (2002) 215-249

Keywords: Research Joint Ventures, Cross-Licensing Agreements, Moral Hazard, Incentive Contracts, Know-How

Abstract: In this paper two broad categories of organizing a cooperative R&D project are compared: a Research Joint Venture (RJV) and a Cross Licensing Agreement (CLA). In a non-deterministic R&D setting including asymmetric information, we show that an RJV is more efficient in providing incentives, it allows to capture existing synergies and facilitates the dissemination of the partners’ know-how, which is socially desirable. However, contrary to a CLA, an RJV faces the risk of opportunistic behavior by the partners regarding the provision of their know-how to the venture, which could lead a CLA to perform more efficiently and, in some cases, this organization turns out to be superior.