We develop a theory of control rights in the context of licencing interim innovative knowledge for further development …, which is consistent with the inalienability of initial innovator's intellectual property rights. Control rights of a … generate more promising interim innovations. We further show that such interim-inefficient control rights can nevertheless be …

The paper shows that the principal can enhance her control over the agent's human capital by acquiring the physical … capital that is critical for him to create value. However, the enhancement in the control necessarily reduces his incentive to … make human capital investment ex ante and to exert eÞort ex post. This trade-off between control and incentive thus decides …