UPV-EHU

This paper analyzes the impact of moral hazard on two entrepreneurs ’ choice whether to conduct product innovation R&D projects alone, or in a cross license agree-ment, or in a research joint venture. We do so for varying degrees of competition in the market in which the invention is to be used. Results show that moral hazard introduces a bias toward conducting R&D projects alone and against making use of synergies in an RJV. Furthermore, moral hazard changes the conflict between socially and privately preferred configurations. From a social standpoint, when there is no moral hazard both too few RJVs and too few cross license agreements are chosen; whereas when there is moral hazard too few RJVs, and too many cross license agreements are chosen