Sequential Innovation and the Duration of Technology Licensing
AbstractWe model an innovator's choice of payment scheme and duration as a joint decision in a multi-period licensing game with potential sequential innovations and some irreversibility of technology transfer. We find that it may be optimal to license the innovation for less than the full length of the patent and that royalty contracts can be used to overcome a time-consistency problem faced by the innovator. Our results suggest that licensing contracts based on royalty have a longer duration than fixed-fee licenses and are more likely to be used in industries where sequential innovations are frequent.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 16882.
Date of creation: Jul 2009
Date of revision:
Innovation; Licensing; Patent; Royalty; Technology Leakage; Time Consistency.;
Find related papers by JEL classification:
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-30 (All new papers)
- NEP-INO-2009-08-30 (Innovation)
- NEP-IPR-2009-08-30 (Intellectual Property Rights)
- NEP-TID-2009-08-30 (Technology & Industrial Dynamics)
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