Goldilocks and the Licensing Firm: Choosing a Partner when Rivals are Heterogeneous
AbstractMarkets are often characterized with firms of differing capabilities with more efficient firms licensing their technology to lesser firms. We examine the effects that the amount of the technology transferred, and the characteristics of the partner have on this licensing. We find that a partial technology transfer can be the joint-profit minimizing transfer; no such transfer then is superior. However, under weakly concave demand, a complete transfer always increases joint profits so long as there are at least three firms in the industry. We also establish a "Goldilocks" condition in partner selection: it is neither too efficient nor too inefficient. Unfortunately, profitable transfers between sufficiently inefficient firms reduce welfare, while transfers from relatively efficient firms increase welfare. However, an efficient firm might not select the least efficient partner, though it is the social-welfare-maximizing partner.
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Bibliographic InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 720.
Date of creation: 01 Nov 2009
Date of revision:
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More information through EDIRC
licensing; technology transfers;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- L4 - Industrial Organization - - Antitrust Issues and Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-07 (All new papers)
- NEP-COM-2009-11-07 (Industrial Competition)
- NEP-INO-2009-11-07 (Innovation)
- NEP-IPR-2009-11-07 (Intellectual Property Rights)
- NEP-MIC-2009-11-07 (Microeconomics)
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Boston College Working Papers in Economics
779, Boston College Department of Economics, revised 06 Apr 2013.
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