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Knowledge Disclosure, Patents and Optimal Organization of Research and Development

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Author Info
Bhattacharya, Sudipto
Guriev, Sergei

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

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Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights

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Full references

Cited by:
(explanations, 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.)

  1. Bhattacharya, Sudipto & Guriev, Sergei, 2008. "Control Rights over Intellectual Property: Corporate Venturing and Bankruptcy Regimes," CEPR Discussion Papers 6927, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Mariagiovanna Baccara & Ronny Razin, 2004. "Curb Your Innovation: Corporate Conservatism in the Presence of Imperfect Intellectual Property Rights," Levine's Working Paper Archive 122247000000000194, David K. Levine. [Downloadable!]
    Other versions:
  3. Sudipto Bhattacharya & Sergei Guriev, 2004. "Patents vs Trade Secrets: Knowledge Licensing and Spillover," Working Papers w0064, Center for Economic and Financial Research (CEFIR), revised Feb 2006. [Downloadable!]
    Other versions:
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