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IP-for-IP or Cash-for-IP? R&D Competition and the Market for Technology

Author

Listed:
  • Patrick Herbst

    (University of Stirling)

  • Eric Jahn

    (University of Cooperative Education Dresden)

Abstract

We analyze how firms might benefit from trading restrictions in the market for technology. We show that restricting trade to reciprocal exchange (“IP-for-IP” barter instead of cash transactions), as in cross-licensing agreements, alters the allocation of R&D resources and reduces overinvestment in R&D. The tighter are the trading restrictions, the higher are the costs that are due to forgone gains from trade. Our analysis of the trade-offs involved shows that firms benefit from IP-for-IP restrictions, compared to both free trade and no trade environments, in industries where: (1) firms differ in their capabilities to commercialize IP; and (2) patent complementarities exist.

Suggested Citation

  • Patrick Herbst & Eric Jahn, 2017. "IP-for-IP or Cash-for-IP? R&D Competition and the Market for Technology," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(1), pages 75-101, August.
    • Handle: RePEc:kap:revind:v:51:y:2017:i:1:d:10.1007_s11151-016-9542-z
    DOI: 10.1007/s11151-016-9542-z
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    More about this item

    Keywords

    Intellectual property; R&D competition; IP-for-IP; Cross-licensing; Technology trade;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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