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Market for R&D Failures

In: Business and Management

Submitted By joserome
Words 3313
Pages 14
Mike Rondesko, KaChun Fung, Daniel Lozano, Jose Romero
Professor Pe’er
Final Essay
18 December 2012

Market for Trading R&D failures

Advancing ones knowledge based on past failures is vital towards furthering intellectual development. Without understanding as to why something doesn’t work, it would be very unlikely that an efficient goal can be reached. This same concept applies to research and development projects in the modern day industry. Using the knowledge of recent failures is what drives progress and technological advancements. However, discovering failures is insensitive to time, resources, and capital in an ever changing world of product innovation. If knowledge of research and development failures were known to firms prior towards their attempt, product growth would be quicker, less risky and more profitable. A market that traded intellectual failures would be beneficial towards the firm and its stakeholders while improving market efficiency. Since understanding failures is so important towards the progression and advancement of a product, there should be a market in which firms can trade R&D failures. However, this market does not exist. Yet, if we can argue that there are advantages for firms to possess more intellectual knowledge, than this market can have hypothetical value. One of the main reasons why there is currently no market for R&D trading is because it can be advantageous towards a firm’s competition even at a cost. If competitors know how to avoid the mistakes that your firm made than they would save time and resources in the development of a new product. Companies would then have more incentive to become second movers driven by an increase in certainty. This may translate to fragmented markets with firms operating at lower margins. Furthermore, competitive nature may lead to moral hazard as firms may attempt to trade…...

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