Ejercicio Practice Case - Question 2 · Economia de L'empresa UPF 2011

Sr. Pallerols, a 48-year-old corporate engineer, has developed in his free time an innovative, patented food product dubbed FRESQUIA with major commercial potential. He is evaluating four distinct options:

Option 1: Sell the patent outright.

Option 2: License production rights to interested manufacturers for a royalty of 1 cent per unit produced.

Option 3: Form a 50/50 joint venture with Nestlé. Sr. Pallerols contributes a temporary operating license for FRESQUIA; Nestlé expands an existing manufacturing plant. Management is handled entirely by Nestlé’s current executive team.

Option 4: Create an independent startup company with 4 investors who contribute 50% of the financial capital, while Sr. Pallerols contributes the remaining 50% plus a permanent assignment of the patent. The company will hire 100 workers, a professional CEO, and 5 industry managers.

12 Practice Case - Question 2 (10 points). Asset specificity and hold-up hazards

In which of the four proposed options would issues related to specific assets (hold-up / opportunism) arise? Explain why these issues emerge in those cases and why they do not occur in the other options.

a)

b)