Optimal Residual Distribution of Cooperative R&D under Incomplete Information

This paper investigates the optimal residual distribution of cooperative R&D under incomplete information. We make a distinction between cooperative R&D effort and monitoring effort. When it is costly to sign contracts on efforts under complete information, it may be optimal to let one firm to monitor and to direct the other firm, and claim full residual. In the benchmark case of incomplete information, we have also explored how the optimal assignment of residual distribution of cooperative R&D and partnership depends on the interaction between each member´s importance in cooperative R&D, the effectiveness of monitoring and the degree of teamwork.