The Economics of Adaptation and Long-term Relationships
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The Economics of Adaptation and Long-term Relationships

Dean V. Williamson

Do institutions matter in economic theory? Or is the economic analysis of institutions a distraction from the most important action? Indeed, does Vernon Smith’s notion of the “institution-free core” of formal economic theory encompass that most important action? To explore this question, this book opens with an informal tour of the economics of system design out of which an economics of adaptation ultimately emerged. The book then offers explorations, via the application of the economics of adaptation in both law and economics relating to how parties manage relationships within the firm, within the context of long-term contracts, and, most vividly, within the context of antitrust conspiracy.
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Chapter 6: Knowledge spillovers and industrial policy: evidence from the Advanced Technology Program and the Department of Defense

Dean V. Williamson


For a generation the federal government has maintained programs promoting research joint ventures (RJVs).The ostensible motivation late in the going was to promote knowledge spillovers.The real motivation was to stem the perceived decline of American competitiveness.It is not obvious, however, that federal government initiatives had any effect with respect to either knowledge spillovers or competitiveness.It is not obvious that public initiatives were good at identifying RJVs that would be best situated to generate spillovers.Instead, federal initiatives appear to have channeled resources to ventures that private parties could have been expected to pursue absent subsidies. The conclusion derives from examination of 171 RJV contracts.Research joint ventures involving technologies that were less susceptible to unintended spillover have tended to exploit contractual mechanisms to contain spillovers.Government-subsidized ventures were more likely to exploit those same mechanisms.

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