Leonardo Becchetti and Luigi Paganetto
"The determinants of suboptimal technological development in the system company-components producers relationship"
JEL codes: O30, L22, G24, D82, G14
Keywords:
Abstract: This paper analyses the behaviour of a high-tech system company in a model where her strategic variable is the choice of the contractual relationship with component producers. The system company develops an optimal contractual design separating component producers qualities and providing optimal incentives to them. The particular features of the system company economics generate, however, a static and a dynamic dilemma in her optimising behaviour: the static dilemma is between: I) releasing property rights to component producers to increase their incentives and ii) maintaining more control on "strategic" components to improve her "systemic" capacity. The dynamic dilemma is about the optimal share of control to maintain inn a framework where the "strategic/nonstrategic" feature of individual components varies over time. Both static and dynamic dilemmas have effects on the divergence between the system company optimum and the socially optimum level of technological development.

Return to Other Abstracts Menu.