Agency and strategic contracts: theory and evidence from R&D agreements in the pharmaceutical industry
We examine the use of strategic rights in research and development (R&D) agreements between a client and an agent, when an entrant may compete with the client for the license of non-contracted discoveries developed by the agent. The agent puts effort either in the contracted project, or into oth...
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| Format: | Article |
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Elsevier
2017
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| Online Access: | https://eprints.nottingham.ac.uk/50063/ |
| _version_ | 1848798143332745216 |
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| author | Guo, Di Hua, Xinyu Jiang, Kun |
| author_facet | Guo, Di Hua, Xinyu Jiang, Kun |
| author_sort | Guo, Di |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | We examine the use of strategic rights in research and development (R&D) agreements between a client and an agent, when an entrant may compete with the client for the license of non-contracted discoveries developed by the agent. The agent puts effort either in the contracted project, or into other R&D activities which can result in non-contracted discoveries. Strategic rights help the client and the agent extract rent from the entrant, and also motivate the agent to place effort into the contracted project. Accordingly, firms are more likely to adopt strategic rights when the likelihood of entry is larger. Moreover, strategic rights and termination rights are substitutes in mitigating agency problems. By investigating R&D agreements between pharmaceutical clients and bio-tech agents, we find consistent evidence of the positive impact of entry threat on the use of strategic rights, as well as evidence of the substitution between strategic rights and termination rights. |
| first_indexed | 2025-11-14T20:15:05Z |
| format | Article |
| id | nottingham-50063 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T20:15:05Z |
| publishDate | 2017 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-500632020-05-04T19:09:49Z https://eprints.nottingham.ac.uk/50063/ Agency and strategic contracts: theory and evidence from R&D agreements in the pharmaceutical industry Guo, Di Hua, Xinyu Jiang, Kun We examine the use of strategic rights in research and development (R&D) agreements between a client and an agent, when an entrant may compete with the client for the license of non-contracted discoveries developed by the agent. The agent puts effort either in the contracted project, or into other R&D activities which can result in non-contracted discoveries. Strategic rights help the client and the agent extract rent from the entrant, and also motivate the agent to place effort into the contracted project. Accordingly, firms are more likely to adopt strategic rights when the likelihood of entry is larger. Moreover, strategic rights and termination rights are substitutes in mitigating agency problems. By investigating R&D agreements between pharmaceutical clients and bio-tech agents, we find consistent evidence of the positive impact of entry threat on the use of strategic rights, as well as evidence of the substitution between strategic rights and termination rights. Elsevier 2017-09-30 Article PeerReviewed Guo, Di, Hua, Xinyu and Jiang, Kun (2017) Agency and strategic contracts: theory and evidence from R&D agreements in the pharmaceutical industry. International Journal of Industrial Organization, 54 . pp. 37-64. ISSN 1873-7986 Agency; Entry threat; Strategic right; Termination https://doi.org/10.1016/j.ijindorg.2017.06.007 doi:10.1016/j.ijindorg.2017.06.007 doi:10.1016/j.ijindorg.2017.06.007 |
| spellingShingle | Agency; Entry threat; Strategic right; Termination Guo, Di Hua, Xinyu Jiang, Kun Agency and strategic contracts: theory and evidence from R&D agreements in the pharmaceutical industry |
| title | Agency and strategic contracts: theory and evidence from R&D agreements in the pharmaceutical industry |
| title_full | Agency and strategic contracts: theory and evidence from R&D agreements in the pharmaceutical industry |
| title_fullStr | Agency and strategic contracts: theory and evidence from R&D agreements in the pharmaceutical industry |
| title_full_unstemmed | Agency and strategic contracts: theory and evidence from R&D agreements in the pharmaceutical industry |
| title_short | Agency and strategic contracts: theory and evidence from R&D agreements in the pharmaceutical industry |
| title_sort | agency and strategic contracts: theory and evidence from r&d agreements in the pharmaceutical industry |
| topic | Agency; Entry threat; Strategic right; Termination |
| url | https://eprints.nottingham.ac.uk/50063/ https://eprints.nottingham.ac.uk/50063/ https://eprints.nottingham.ac.uk/50063/ |