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Appropriability and Commercialization: Evidence from MIT Inventions

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Author Info

  • Emmanuel Dechenaux

    ()
    (Department of Economics, Kent State University, Kent, Ohio 44242)

  • Brent Goldfarb

    ()
    (Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742)

  • Scott Shane

    ()
    (Department of Economics, Case Western Reserve University, Cleveland, Ohio 44106)

  • Marie Thursby

    ()
    (College of Management, Georgia Institute of Technology and NBER, Atlanta, Georgia 30308)

Abstract

The effects of appropriability on invention have been well studied, but there has been little analysis of the effect of appropriability on the commercialization of existing inventions. Exploiting a database of 805 attempts by private firms to commercialize inventions licensed from the Massachusetts Institute of Technology (MIT) between 1980 and 1996, we explore the influence of several appropriability mechanisms on the commercialization and termination of projects to develop products based on university inventions. Our central hypothesis is that the relationship between a licensee's decision to either terminate or commercialize the invention is driven by the current market value of the invention, as well as the option value of delaying its commercialization. We use a competing risks framework that allows for nonparametric heterogeneity and correlated risks. We find that better appropriability in the sense of more effective patent strength and secrecy has a strong negative effect on the hazard of license termination. The effectiveness of learning has a strong positive effect on the hazard of technology commercialization, while lead time has a negative effect.

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File URL: http://dx.doi.org/10.1287/mnsc.1070.0780
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 54 (2008)
Issue (Month): 5 (May)
Pages: 893-906

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Handle: RePEc:inm:ormnsc:v:54:y:2008:i:5:p:893-906

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Keywords: competing risks; innovation; optimal stopping problem; patent scope; lead time; learning; university licensing; termination;

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References

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Citations

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Cited by:
  1. Lerner, Josh & Tåg, Joacim, 2012. "Institutions and Venture Capital," Working Paper Series 897, Research Institute of Industrial Economics.
  2. Simon Wakeman, 2012. "How does obtaining intellectual property rights impact technology commercialization strategy for start-up innovators? Reconciling the effects on licensing vs. financing," ESMT Research Working Papers ESMT-12-03 (R1), ESMT European School of Management and Technology, revised 11 Jul 2012.
  3. Mariagrazia Squicciarini, 2009. "Science parks: seedbeds of innovation? A duration analysis of firms’ patenting activity," Small Business Economics, Springer, vol. 32(2), pages 169-190, February.
  4. Peng Huang & Marco Ceccagnoli & Chris Forman & D.J. Wu, 2009. "Participation in a Platform Ecosystem: Appropriability, Competition, and Access to the Installed Base," Working Papers 09-14, NET Institute, revised Sep 2009.
  5. Elizabeth Webster & Paul H. Jensen, 2011. "Do Patents Matter for Commercialization?," Journal of Law and Economics, University of Chicago Press, vol. 54(2), pages 431 - 453.
  6. Hall, Bronwyn H., 2009. "The financing of innovative firms," EIB Papers 8/2009, European Investment Bank, Economics Department.
  7. Darcy, Jacques & Krämer-Eis, Helmut & Guellec, Dominique & Debande, Olivier, 2009. "Financing technology transfer," EIB Papers 10/2009, European Investment Bank, Economics Department.
  8. Harhoff, Dietmar, 2009. "The role of patents and licenses in securing external finance for innovation," EIB Papers 11/2009, European Investment Bank, Economics Department.
  9. Haeussler, Caroline & Harhoff, Dietmar & Müller, Elisabeth, 2009. "To Be Financed or Not... - The Role of Patents for Venture Capital Financing," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 253, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  10. Bottazzi, Laura, 2009. "The role of venture capital in alleviating financial constraints of innovative firms," EIB Papers 9/2009, European Investment Bank, Economics Department.
  11. Haeussler, Carolin & Harhoff, Dietmar & Mueller, Elisabeth, 2009. "To Be Financed or Not … - The Role of Patents for Venture Capital Financing," Discussion Papers in Business Administration 8970, University of Munich, Munich School of Management.
  12. Nelson, Andrew J., 2012. "Putting university research in context: Assessing alternative measures of production and diffusion at Stanford," Research Policy, Elsevier, vol. 41(4), pages 678-691.
  13. Fischer, Timo & Henkel, Joachim, 2013. "Complements and substitutes in profiting from innovation—A choice experimental approach," Research Policy, Elsevier, vol. 42(2), pages 326-339.

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