R&D outsourcing and intellectual property infringement

We empirically address value appropriation hazards when firms enter into external relationships in search for innovation. Using firm-level data from Germany we document a positive link between R&D outsourcing and intellectual property infringement. In line with theory we show that this effect varies with the market value of knowledge, and the allocation of property rights. We discuss how outsourcing induced spillovers may foster technology diffusion, affecting industry evolution and market structure.