Alliances and markets for technology

Compared to alliances for other purposes, research alliances create additional tensions. In this chapter, we use the term research alliances to encompass all types of collaborations between two parties that join forces to conduct research and innovate. In these alliances, problems of asymmetry of information and contract incompleteness are particularly relevant. The research process is hard to monitor and therefore it is difficult to establish contractually the parties’ effort or investments. Similarly, research skills or other innovation capabilities are difficult to nail down with precision. The parties can then hardly ascribe any lack of success to lack of effort (moral hazard), partner’s ability (adverse selection), or genuine bad luck. Standard performance-based incentives are not helpful because, as pointed out, inter alia, by Teece (1988), it is equally hard to define ex-ante the output of research, its economic value, and how to share it (incomplete contracts). This opens the way to ex-post negotiation to share the benefits from collaborating.