We show that in the case of perfectly substitutable investments these conclusions are still true in the static setting, even if investments are in physical capital. However, if the parties can invest and generate a surplus twice, then joint ownership may imply first-best investments in the first stage and can well be the optimal ownership structure. Using the incomplete contract approach, horizontal partnerships always turn out to be optimal in the static case, given that the asset controlled by the owner is an excludable public good such as a patent. However, a rationale for vertical relationships can be provided in the dynamic case, even though firms are homogenous. Firms' incentives to form RJVs are analyzed in an incomplete information framework when technological know-how is private information Firms first decide on cooperation and information revelation and then compete for a patent.
Cooperation can occur for low spillovers.
For certain parameters there exists an equilibrium in which only firms with low know-how cooperate. Research joint ventures, incomplete information, spillovers, second-price auction. When two parties invest in human capital and at the same time decide on know-how disclosure it can be shown that joint ownership with veto power is the optimal ownership structure, given that only incomplete contracts can be written. In a model of an uncovered market of vertically differentiated products, incentives of non-identical duopolists to improve the technological maximum quality are analyzed. This induces a reconsideration of firms' quality decisions.