Knowledge Disclosure, Patents and Optimal Organization of Research and Development
Abstract
We develop a model of two-stage cumulative research and development (R&D), in which one Research Unit (RU) with an innovative idea bargains to license her nonverifiable interim knowledge exclusively to one of two competing Development Units (DUs) via one of two alternative modes: an Open sale after patenting this interim knowledge, or a Closed sale in which precluding further disclosure to a competing DU requires the RU to hold a stake in the licensed DU's post-invention revenues. Both models lead to partial leakage of RU's knowledge from it's description, to the licensed DU alone in a closed sale, and to both DUs in an open sale. We find that higher levels of interim knowledge are more likely to be licensed via closed sales. If the extent of leakage is lower, more RUs choose open sales, generating a non-monotonic relationship between the strength of Intellectual Property Rights (IPR) and aggregate R&D expenditures. We also develop a rationale for the ex ante acquisition of control rights over the RU by a DU, rooted in the RU's incentives to create knowledge under alternative modes of sale thereof, and her wealth constraint in ex interim bargaining.Download Info
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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Theoretical Economics Paper Series with number /2004/478.Length:
Date of creation: Sep 2004
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Handle: RePEc:cep:stitep:/2004/478
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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp
Related research
Keywords: R&D organisation; patents; intellectual property rights;Other versions of this item:
- Bhattacharya, Sudipto & Guriev, Sergei, 2004. "Knowledge Disclosure, Patents and Optimal Organization of Research and Development," CEPR Discussion Papers 4513, C.E.P.R. Discussion Papers.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property Rights
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-02 (All new papers)
- NEP-INO-2005-01-02 (Innovation)
- NEP-MIC-2005-01-02 (Microeconomics)
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