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Knowledge Disclosure, Patents and Optimal Organization of Research and Development

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  • Bhattacharya, Sudipto
  • Guriev, Sergei

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 non-verifiable 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 modes lead to partial leakage of the RU’s knowledge from its 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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4513.

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Date of creation: Aug 2004
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Handle: RePEc:cpr:ceprdp:4513

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Keywords: corporate venturing; patents; research and development; sequantial innovation;

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References

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Citations

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Cited by:
  1. Sudipto Bhattacharya & Sergei Guriev, 2005. "Patents vs trade secrets: knowledge licensing and spillover," LSE Research Online Documents on Economics 444, London School of Economics and Political Science, LSE Library.
  2. Sudipto Bhattacharya & Sergei Guriev, 2008. "Control Rights over Intellectual Property: Corporate Venturing and Bankruptcy Regimes," Working Papers w0118, Center for Economic and Financial Research (CEFIR).
  3. Martimort, David & Poudou, Jean-Christophe & Sand-Zantman, Wilfried, 2009. "Contracting and Ideas Disclosure in the Innovation Process," IDEI Working Papers 567, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Trommetter, M., 2007. "Flexibility in the implementation of intellectual property rights in agricultural biotechnology," Working Papers 200708, Grenoble Applied Economics Laboratory (GAEL).
  5. Baccara, Mariagiovanna & Razin, Ronny, 2004. "Curb Your Innovation: Corporate Conservatism in the Presence of Imperfect Intellectual Property Rights," CEPR Discussion Papers 4466, C.E.P.R. Discussion Papers.
  6. Thomas Hellmann & Enrico Perotti, 2011. "The Circulation of Ideas in Firms and Markets," Management Science, INFORMS, vol. 57(10), pages 1813-1826, October.
  7. Guido Friebel & Sergei Guriev, 2004. "Earnings Manipilation and Incentives in Firms," Working Papers w0055, Center for Economic and Financial Research (CEFIR), revised Oct 2005.
  8. Козырев А.Н. & Неволин И. В., 2013. "Применение Алгоритма Решения Задачи Об Оптимальном Распределении Ресурсов К Проблеме Назначения Цены За Ис�," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 49(3), pages 57-68, июль.

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