Inefficiencies in technology transfer: theory and empirics
AbstractMarkets for technology can promote innovation by allowing for division of labor in research and development. Some firms may specialize in the discovery of ideas, while others have a comparative advantage in later stages of development and marketing. However, these gains depend on the timing of technology transfer: the buyer of an idea should take over development at the stage at which he has an efficiency advantage. We show that in an environment with asymmetric information about the value of the idea and where this asymmetry decreases as the product is developed, deviations from the optimal timing of technology transfer will occur. We obtain a condition for the optimal timing to take place and show that the intensity of competition between potential buyers has countervailing effects on this condition. An empirical analysis of licensing contracts signed between biotechnology firms and large pharmaceutical firms confirms our theoretical predictions.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8206.
Date of creation: Jan 2011
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Other versions of this item:
- Marie-Laure Allain & Margaret K. Kyle & Emeric Henry, 2011. "Inefficiencies in technology transfer: theory and empirics," Sciences Po publications 8206, Sciences Po.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
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