actually arini aku belajar sesuatu yang baru.. belajar memperbetulkan kesalahan apabila wat summary.. actually masa sekolah dulu kita wat summary mcm yg aku wat kat bawah nie.. tp biler dah masuk degree, summary sama seperti literature review.. kena ader intro, body n conclusion.. n kena quota kan author dier.. intro plak amik drp abstrak lam journal.. xsusah pun.. cuma xde pendedahan secara terperinci ttg wat summary dr lecturer.. tue yg kelam kelibut jadinya.. anyway TQ to En Azizan, my risk management lecturer yg sudi ajar mcm mana nak wat dgn betul.. :)
Summary
The research topic from this journal is controlling contractual exchange risks in research and development interfirm cooperation. The method that been use in this research is an empirical study. Furthermore, this research involving the research and development of interfirm cooperation. In this research, two method of risk have been perceived from the suppliers and buyer such as risk to achieve a lower profitability on the innovation return from the exchange partner while the other one are the risk of the partner becoming a competitor by unplanned. It is also known as one-sided knowledge flows.
This research analyse on how an option on later negotiation of an additional continuous innovation return on sharing which is based on the contractual hostages can decrease the perceived of exchange risks. The empirical study has been use in this research to examine how effectively these hostages lower the perceived risks. The objective of research and development interfirm cooperation is to control opportunism typically cause agency as well as transaction costs and thus a loss of economic welfare.
This research is more focus on two things that is the profitability risk which constitutes the danger to obtain a lower profitability than the exchange partner, and the second thing is competitor creation risk. This research focus on five groups of research and development supply relations that is contract research, transfer of existing research results, contract development, transfer of existing development results and licensing of development results.
In the cases of contract research and research result transfer the hostages are the only way to get a continuous return share because of the doubt and to be more precise, because there is no chance of share assessment at the basis of a final product at the time of contracting. The other cases is contract development which is they have an assessment basis at the time of contracting.
The difference is contract research and research result transfer use a basis typically before the process complete. So that, the supplier can demands a continuous share as reward for proceeding with the development process instead of stopping it opportunistically. The ceases of transfer of existing development results and licensing of development results the basis already exist at the time of contracting.
In these cases a continuous return share can be specified in the contract and in licensing agreements it is typical in the form of royalties because the continuous share has been specified. According to the cases above, empirically test been used to examine the effect of the hostages on the perceived risks without differentiate the supply relation types. Furthermore, the empirically test also use to examine the effect in contract research relations comparedto the contract development relations.
We often see a specialization of R&D suppliers in the early stages of theinnovation process, in high technology industries, such as biotechnology or information technology. It also known as basic research and applied research, whereas the R&D buyers focus on the later stages of the process such as development, production and marketing of final products. In many cases there is also an outsourcing of development activities by this interfirm cooperation.
Two exchange of risk perceived by the supplier and buyer. First is the profitability risk such as the danger to achieve a lower profitability than the exchange partner.Suppliers and buyers can calculate the innovation’s profitability by comparing their innovation return share to their costs.The supplier compares their production costs to the final payment, in case of a licensing agreement also to the royalties. The buyer calculates his profitability from the innovation return minus the supplier compensation.
Second is the competitor creation risk establishes the danger to achieve a lower inter partner learning effect than the exchange partner.The risk can be reduced if the supplier could also gain insights into the knowledge of his exchange partner. A supplier who has the necessary resources can become a potential competitor using the buyer’s knowledge about the production and marketing of final products.
In this research they see that in all investigated supply relations the supplier’s return is threatened by hold up. The beginning of the process of contract research or development the supplier invests more in specific assets than the buyer. The buyer only gives information by specifying their demands. So that, there is a possibility of hold up by the buyer, threatened the expected supplier compensation.In the case of licensing development results the situation is similar to the contract research or development.
The supplier or the licensor, typically invests more in specific assets than the buyer at the beginning of the exchange relation because the transfer of the licence object has to be regarded as ruined costs. The buyer can exploit the resulting need to lower the inferior royalties. It also can turn out the licensee as it does not work as effective and not as motivated as necessary to exploit the market potential. Therefore, the licensor’s expected return is endangered in two ways. The competitor creation risk is different to the profitability risk.
It does not result from opportunistic behaviour caused by specific investments and asymmetricinformation.
It arises from the fact that is observed on R&D supply relations, only the buyer can gain insights into the production process of the exchange partner. In this research the instrument that been used in exchange risksof R&D suppliers; agency and transaction cost theory is Agency Theory. It discusses different instruments which help to minimize the profitability risk of the supplier regarding the payments minimize the risk of hold up experienced by the supplier of contract research or development. Before the beginning of the research or development process and reduce the maximum possible damage the payments have been transferred.
Other than that, without exclusive buying rights or in case of a standard licence, the hold-up risk of the licensor is reduced because the licensor could cooperate with alternative licensees.In order to prevent a lack of performance motivation, minimum licence fees can be agreed. Buyers, who agree to these conditions, can demonstrate their performance orientation and motivation. In other way, Transaction Cost Theory suggests specific investments of the buyer as safeguards and also in favour of the supplier against the hold-up risk. Agency and Transaction Cost Theory do not deal directly with competitor creation risk. In this research stated that we suppose have a continuous return share agreement to imply closer interaction and thus creates a basis on which the supplier can gain insights into the buyer’s competences.
Two hypotheses have been developed regarding to test whether an option on post contractual negotiation of an additional continuous innovation return share is perceived by R&D suppliers as lowering their exchange risks. The first hypothesis is concerns the influence of contractual hostages on the perceived control of risks without differentiating between different groups of R&D suppliers. It means a growing number of contractual provisions increase the perceived satisfaction of the R&D supplier with the control of exchange risks. In this hypothesis include concerning the profitability risk and concerning the competitor creation risk.
The second hypothesis is based on the presumption that the suppliers of contract development are less dependent on contractual hostages than the suppliers of contract research. The hypotheses that get from this basis is with an increasing number of contractual provisions, the perceived satisfaction with the control of exchange risks grows more in the case of a supplier of contract research than in the case of a supplier of contract development. This hypothesis involves two criteria that is concerning the profitability risk and concerning the competitor creation risk.
The researcher in this research tested the two hypotheses above in a quantitative-empirical analysis of vertical interfirm cooperation in high technology industries. The random sample that been used in this research consist of 1.200 companies founded until 31 December 1997 which received a questionnaire in the time between December 1999 and February 2000. In order to complete this research, every of each respondent was asked to refer on one typical cooperation which had already been completed or at least existed for a year when answering the questions and the contractual provisions were measured.
The first hypothesis obtained that the fact that the group with few provisions is more satisfied with the risk control than the group with a medium number of provisions. It found that the suppliers of group that have found ways of risk control other than the contractual hostages.The second hypothesis obtained that with an increasing number of contractual provisions the perceived supplier’s satisfaction with the control of the competitor creation risk grows more in case of a research contract than in the development contract.
Regarding to the maximization of innovation return, R&D suppliers who behave opportunistically, make a suboptimal investments. Perception of exchange risks is a major reason for opportunism. In this research also stated that the exploitation of the innovation by the buyer can be obstructed by six ways.
First is,if there is no exclusive buying right for the buyer. Second is,if the supplier is not obligated to treat the buyer’s know-how confidentially. Third is, if the buyer is obligated to treat the supplier’s know-how confidentially. Fourth is, if the supplier is not obligated to inform the buyer about further developments of the contract object.
Fifth is, if the buyer is obligated to inform the supplier about further developments of the contract object. The last way is in case of mutual specific investments of the supplier and the buyer in the exchange relation.The exploitation of the innovation can be blocked, not only hindered, by providing the supplier with exploitation rights on further developments of the contract object.
The benefit that obtained from this research are describing exchange risks of suppliers as hindering factors in R&D supply relations, analysing buyer opportunism as major reason for those risks and present an integrated view on buyer opportunism in the different R&D supply relations, giving an insight how the mechanism of contractual hostages against buyer opportunism that is realized in practice and offering empirical results concerning the effectiveness of contractual provisions against the perceived exchange risks of the supplier.
Overall conclusions that can get from this research journal are the interpretation of the empirical study has to be viewed against the background of the small sample size. It also is necessary to consider that the survey concerned isone of the most sensitive areas of a company.
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