Determinants of Contract Renewals in University–Industry Contract Research: Going my Way, or Good Sam?

Abstract

AbstractLong-term university–industry contract research benefits both universities and the industry, as it can potentially reduce transaction costs and improve the quality of such collaborations. Nevertheless, trade-offs between the advantages and disadvantages of long-term contracts motivate firms to enter stage-gate contracts (i.e., a shorter contract period with an expectation of renewal or extension) to avoid uncertainty over collaboration’s performance. This study addresses two less understood questions in the contract renewal or extension decision: longitudinal changes in the strength of the commitment to the collaboration and the determinants of renewals. We empirically test these issues with 1562 research contracts from a leading Japanese university, and we match this database to a questionnaire survey results obtained from its industrial counterparts. Our empirical test identified an inverse-U-shaped effect on the degree of commitment in the time elapsed since the first research contract. We also found that firms are more likely to renew or extend a contract when they perceive technological knowledge learning or co-publish an academic paper. Our findings suggest that university–industry contract research focused on academic research-related activities (or academic researcher’s “going my way”) is likely to establish long-term collaborations.