Opt-out options in new product co-development partnerships

We study three contractual arrangements—co-development, licensing, and co-development with opt-out options—for the joint development of new products between a small and financially constrained innovator firm and a large technology company, as in the case of a biotech innovator and a major pharma company. We formulate our arguments in the context of a two-stage model, characterized by technical risk and stochastically changing cost and revenue projections. The model captures the main disadvantages of traditional co-development and licensing arrangements: in co-development the small firm runs a risk of running out of capital as future costs rise, while licensing for milestone and royalty (M&R) payments, which eliminates the latter risk, introduces inefficiency, as profitable projects might be abandoned. Counter to intuition we show that the biotech's payoff in a licensing contract is not monotonically increasing in the M&R terms. We also show that an option clause in a co-development contract that gives the small firm the right but not the obligation to opt out of co-development and into a pre-agreed licensing arrangement avoids the problems associated with fully committed co-development or licensing: the probability that the small firm will run out of capital is greatly reduced or completely eliminated and profitable projects are never abandoned.

A process model based methodology to support conflict management

The product design development has increasingly become a collaborative process. Conflicts often appear in the design process due to multi-actors interactions. Therefore, a critical element of collaborative design would be conflict situations resolution. In this paper, a methodology, based on a process model, is proposed to support conflict management. This methodology deals mainly with the conflict resolution team identification and the solution impact evaluation issues. The proposed process model allows the design process traceability and the data dependencies network identification; which making it be possible to identify the conflict resolution actors as well as to evaluate the selected solution impact. Copyright © 2006 IFAC.