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Licensing the Market for Technology

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  • Arora, Ashish
  • Fosfuri, Andrea

Abstract

In technology-based industries, incumbent firms often license their technology to other firms that will potentially compete with them. Such a strategy is difficult to explain within traditional models of licensing. This paper extends the literature on licensing by relaxing the assumption of a monopolist technology holder. We develop a model with many technological trajectories for the production of a differentiated good. We find that competition in the market for technology induces licensing of innovations, and that the number of licenses can be inefficiently large. A strong testable implication of our theory is that the number of licenses per patent holder decreases with the degree of product differentiation.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2284.

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Date of creation: Nov 1999
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Handle: RePEc:cpr:ceprdp:2284

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Related research

Keywords: Licensing; Market Structure; Oligopoly Theory;

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  1. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
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  12. Joshua S. Cans & Scott Stern, 2000. "Incumbency and R&D Incentives: Licensing the Gale of Creative Destruction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 485-511, December.
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  18. Rockett, Katharine, 1990. "The quality of licensed technology," International Journal of Industrial Organization, Elsevier, vol. 8(4), pages 559-574, December.
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  27. Baye, Michael R & Crocker, Keith J & Ju, Jiandong, 1996. "Divisionalization, Franchising, and Divestiture Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 86(1), pages 223-36, March.
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  1. Commercialization strategies for start-ups: Examples
    by Paul Belleflamme in IPdigIT on 2012-12-04 10:27:01
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