Innovation Contracts with Leakage Through Licensing
AbstractIn this paper a Developer contracts with a Researcher for the production of a non-drastic innovation. Since effort is non-contractible, the Developer offers an incentive contract dependent on the observed magnitude of the innovation. It is shown that the distribution of intellectual property rights (IPR) ownership does not affect the level of effort exerted for innovations where the Developer would choose to license the innovation to its competitors. This is because the possibility of leakage of the innovation through licensing subsidies the Developer's payment when IPR is delegated to the Researcher, while at the same time eroding its profit.
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Bibliographic InfoPaper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2010-530.
Length: 34 Pages
Date of creation: Oct 2010
Date of revision:
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-16 (All new papers)
- NEP-CTA-2010-10-16 (Contract Theory & Applications)
- NEP-INO-2010-10-16 (Innovation)
- NEP-IPR-2010-10-16 (Intellectual Property Rights)
- NEP-REG-2010-10-16 (Regulation)
- NEP-TID-2010-10-16 (Technology & Industrial Dynamics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rubén Hernández-Murillo & Gerard Llobet, 2004.
"Patent licensing revisited: heterogeneous firms and product differentiation,"
2002-031, Federal Reserve Bank of St. Louis.
- Hernandez-Murillo, Ruben & Llobet, Gerard, 2006. "Patent licensing revisited: Heterogeneous firms and product differentiation," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 149-175, January.
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