This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

American Economic Review: Vol. 100 No. 1 (March 2010)

AER Volume. 100, Issue 1 | leftPrevious ArticleNext Articleright

Expand

Quick Tools:

Print Article Summary Email Link to this Article Export Citation
Sign up for Email Alerts Follow us on Twitter

Explore:

AER - All Issues

AER Forthcoming Articles

Contractibility and the Design of Research Agreements

Article Citation

Lerner, Josh, and Ulrike Malmendier. 2010. "Contractibility and the Design of Research Agreements." American Economic Review, 100(1): 214-46.

DOI: 10.1257/aer.100.1.214

Abstract

We analyze how contractibility affects contract design. A major concern when designing research agreements is that researchers use their funding to subsidize other projects. We show that, when research activities are not contractible, an option contract is optimal. The financing firm obtains the option to terminate the agreement and, in case of termination, broad property rights. The threat of termination deters researchers from cross-subsidization, and the cost of exercising the termination option deters the financing firm from opportunistic termination. We test this prediction using 580 biotechnology research agreements. Contracts with termination options are more common when research is non-contractible. (JEL D86, L65, O31, O34)

Article Full-Text Access

Full-text Article

Additional Materials

Download Data Set (176.25 KB) | Appendix (592.42 KB)

Authors

Lerner, Josh (Harvard U)
Malmendier, Ulrike (U CA, Berkeley)

JEL Classifications

D86: Economics of Contract: Theory
L65: Chemicals; Rubber; Drugs; Biotechnology
O31: Innovation and Invention: Processes and Incentives
O34: Intellectual Property Rights


American Economic Review



AEA Member Login:


Quick Tools:

Email Link to this Issue

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AER - All Issues

AER - Forthcoming Articles

AEA Journals

Virtual Field Journals

AEAweb | AEA Journals | Contact Us