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How Licensing Resolves Hold-Up: Evidence from a Dynamic Panel Data Model with Unobserved Heterogeneity

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  • Siebert, Ralph
  • von Graevenitz, Georg

Abstract

This paper is a study of licensing in a patent thicket. In a patent thicket licensing allows firms to avoid hold-up. It will have different effects on firms' R&D incentives depending on whether firms license existing or future patents. Building on a model of a patent portfolio race, firms' choice between these types of licensing contracts is modelled. We find that firms' relationships in product markets and technology space jointly determine the type of licensing contract chosen. We derive several hypotheses and test these. Using data from the semiconductor industry a dynamic panel data model with unobserved heterogeneity and a lagged dependent variable is estimated. A new method suggested by Wooldridge (2005) is employed to estimate a random effects probit model using conditional ML. The hypotheses derived from the theory are confirmed. Based on our results we argue that licensing raises welfare in the patent thicket.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5436.

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Date of creation: Jan 2006
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Handle: RePEc:cpr:ceprdp:5436

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Keywords: hold-up problem; innovation; licensing; patent race; patent thicket;

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References

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Citations

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Cited by:
  1. Siebert, Ralph & von Graevenitz, Georg, 2006. "Jostling for Advantage: Licensing and Entry into Patent Portfolio Races," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5753, C.E.P.R. Discussion Papers.
  2. Haizhen Lin, 2010. "Do Minimum Quality Standards Improve Quality? A Case Study of the Nursing Home Industry," Working Papers, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy 2010-01, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  3. Alberto Galasso, 2007. "Broad cross-license agreements and persuasive patent litigation: theory and evidence from the semiconductor industry," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 6718, London School of Economics and Political Science, LSE Library.
  4. Alberto Galasso, 2007. "Broad Cross-License Agreements andPersuasive Patent Litigation: Theory andEvidence from the Semiconductor Industry," STICERD - Economics of Industry Papers 45, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  5. Christian Jaag, 2013. "Intellectual Property Rights and the Future of Universal Service Obligations in Communications," Working Papers, Swiss Economics 0040, Swiss Economics.
  6. Mueller, Elisabeth & Cockburn, Iain M. & MacGarvie, Megan, 2013. "Access to intellectual property for innovation: Evidence on problems and coping strategies from German firms," Research Policy, Elsevier, vol. 42(2), pages 529-541.
  7. Müller, Elisabeth & MacGarvie, Megan J. & Cockburn, Iain M., 2008. "Patent Thickets, Licensing and Innovative Performance," ZEW Discussion Papers 08-101, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Katharine Rockett, 2009. "Property Rights and Invention," Economics Discussion Papers, University of Essex, Department of Economics 663, University of Essex, Department of Economics.

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