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| Author: | Ho, S.J. |
| Title: | Information leakage in innovation outsourcing |
| Journal: | R & D Management
2009 : NOV, VOL 39:5 p. 431-443 |
| Index terms: | contracts revenue competition |
| Freeterms: | research and development |
| Language: | eng |
| Abstract: | This paper investigates R&D outsourcing contracts between a firm and a contractor, considering that in the interim stage, the contractor could sell the innovation to a competitor. Our findings point out that resulting from the competition in the interim stage, the reward required to prevent leakage will be raised to the point where a profitable leakage-free contract does not exist. This outcome will also apply to revenue-sharing schemes and a disclosure punishment for commercial theft. We also show that in a competitive mechanism where the R&D firm hires two contractors together with a relative performance scheme, the disclosure punishment could help and a perfect Bayesian Nash equilibrium exists, where the information leakage likelihood is lower and the equilibrium reward is also cheaper than hiring one contractor. |
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