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This paper analyzes the strategic use of bilateral supply contracts in sequential negotiations between one manufacturer and two differentiated retailers. The first main result is that, despite the feasibility of general supply contracts which are functions of own quantity (but cannot be contingent on the rival's quantity), the first contracting parties have incentives to manipulate their contract to shift rent from the second contracting retailer and these incentives distort the industry profit away from the fully-integrated monopoly outcome. The second main result is that if the contract terms between the manufacturer and the first retailer can be renegotiated from scratch in the event that the second retailer has no agreement, then the monopoly outcome can be achieved, often with full rent extraction from the second retailer. Moreover, there are conditions under which renegotiation from scratch yields higher joint profit for the firstly contracting parties than no renegotiation. These results do not depend on the type of retail competition, the level of differentiation between the retailers, the order of sequential negotiations, the level of asymmetry between the retailers in terms of their bargaining power vis-à-vis the manufacturer, or their profitability from being the monopoly retailer.

With permission of Elsevier

Users often interact and help each other solve problems in communities, but few scholars have explored how these relationships provide opportunities to innovate. We analyze the extent to which people positioned within the core of a community as well as people that are cosmopolitans positioned across multiple external communities affect innovation. Using a multimethod approach, including a survey, a complete database of interactions in an online community, content coding of interactions and contributions, and 36 interviews, we specify the types of positions that have the strongest effect on innovation. Our study shows that dispositional explanations for user innovation should be complemented by a relational view that emphasizes how these communities differ from other organizations, the types of behaviors this enables, and the effects on innovation.

© 2012 INFORMS

The importance of intellectual property (IP) rights for commercializing innovation is well established. Moreover, separate streams of literature have shown a positive relationship between IP rights and both product licensing and third-party (especially VC) financing. However, since raising third-party finance enables an innovating firm to continue commercializing its innovation alone, it is not clear how obtaining IP rights will impact the choice between licensing product rights and continuing to commercialize the product alone. This paper attempts to reconcile these two alternative effects of obtaining IP rights and the implications for commercialization strategy. The paper empirically examines the relationship between the status of the primary patent covering an innovation and whether the innovating firm’s licenses its innovation or raises external finance. The results show that while filing and allowance of the primary significantly increases the likelihood of raising finance at certain stages of the firm/product’s development, and thereby enable the firm to delay licensing, obtaining patent rights has a much larger, positive effect on licensing. While it is not possible to identify the drivers of these different effects from the empirical analysis, the theory suggests that patent filing may act as a signal to financial investors that enable early-stage firms to raise finance, but ultimately they are most valuable as appropriability mechanisms for facilitating financing.

 

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