A comparison of milestone-based and buyout options contracts for coordinating R&D partnerships

We analyze optimal contractual arrangements in a bilateral research and development (R&amp;D) partnership between a risk-averse provider that conducts early-stage research followed by a regulatory verification stage and a risk-neutral client that performs late-stage development activities, including production, distribution, and marketing. The problem is formulated as a sequential investment game with the client as the principal, where the investments are observable but not verifiable. The model captures the inherent incentive alignment problems of double-sided moral hazard, risk aversion, and holdup. We compare the efficacy of milestone-based options contracts and buyout options contracts from the client's perspective and identify conditions under which they attain the first-best outcome for the client. We find that milestone-based options contracts always attain the first-best outcome for the client when the provider has some bargaining power in renegotiation and identify their applicability to different R&amp;D partnerships. This paper was accepted by Yossi Aviv, operations management. </jats:p

Corporate Structure and Performance Feedback: Aspirations and Adaptation in M-Form Firms

In this study, we examine how business units of multidivisional (M-form) firms adapt their activities in response to poor performance at the corporate and business unit levels. By linking performance feedback theory with theories of attention and M-form organizations, we show that corporate structure influences the relationship between performance below aspirations and business unit adaptation. Because corporate structure vertically differentiates performance goals and problemistic search, solutions to performance problems vary across corporate and business unit levels, with divergent implications for business unit adaptation. We examine business unit adaptation empirically through new product introductions in the global mobile device industry, finding that poor performance at the business unit level leads to greater new product introductions. In contrast, corporate-level responses to performance problems have a negative cross-level effect on new product introductions. We also find that these negative effects are attenuated for strategically significant business units, which have more input into corporate responses. By linking structural and behavioral drivers of action, this paper contributes to the knowledge and understanding of adaptive behavior in multidivisional firms

Corporate Structure and Performance Feedback: Aspirations and Adaptation in M-Form Firms

In this study, we examine how business units of multidivisional (M-form) firms adapt their activities in response to poor performance at the corporate and business unit levels. By linking performance feedback theory with theories of attention and M-form organizations, we show that corporate structure influences the relationship between performance below aspirations and business unit adaptation. Because corporate structure vertically differentiates performance goals and problemistic search, solutions to performance problems vary across corporate and business unit levels, with divergent implications for business unit adaptation. We examine business unit adaptation empirically through new product introductions in the global mobile device industry, finding that poor performance at the business unit level leads to greater new product introductions. In contrast, corporate-level responses to performance problems have a negative cross-level effect on new product introductions. We also find that these negative effects are attenuated for strategically significant business units, which have more input into corporate responses. By linking structural and behavioral drivers of action, this paper contributes to the knowledge and understanding of adaptive behavior in multidivisional firms