Royalties vs. fees: How do firms pay for foreign technology?
AbstractThe theoretical determinants of technology licensing contracts have been extensively studied but empirical evidence is scarce. We assemble a data set of all the foreign technology licensing agreements entered into by manufacturing firms in India between 1989 and 1993. Industry, firm, and contract characteristics are used to explain differences between the forms of payment in licensing contracts. Our findings support theoretical arguments; licensing contracts are more likely to use royalties when sales are relatively high, while increased volatility of sales and greater profitability favor fixed fee contracts. We also find that firms are more likely to use output based payments to control the sale and diffusion of R&D or brand intensive know-how to unaffiliated firms.
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Bibliographic InfoPaper provided by Department of Economics, College of Business, Florida Atlantic University in its series Working Papers with number 04023.
Length: 14 pages
Date of creation: Oct 2004
Date of revision: Sep 2006
Publication status: Forthcoming in International Journal of Industrial Organization
Technology transfer; licensing contracts;
Other versions of this item:
- Vishwasrao, Sharmila, 2007. "Royalties vs. fees: How do firms pay for foreign technology?," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 741-759, August.
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-BEC-2006-11-18 (Business Economics)
- NEP-CSE-2006-11-18 (Economics of Strategic Management)
- NEP-INO-2006-11-18 (Innovation)
- NEP-IPR-2006-11-18 (Intellectual Property Rights)
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