Innovation contracts with leakage through licensing
AbstractIn this paper a Developer contracts with a Researcher for the production of a non-drastic innovation. Since effort is non-contractible, the Developer offers an incentive contract dependent on the observed magnitude of the innovation. It is shown that the distribution of intellectual property rights (IPR) ownership does not affect the level of effort exerted for innovations where the Developer would choose to license the innovation to its competitors. This is because the possibility of leakage of the innovation through licensing subsidies the Developer's payment when IPR is delegated to the Researcher, while at the same time eroding its profit.
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Bibliographic InfoPaper provided by University of Tasmania, School of Economics and Finance in its series Working Papers with number 10282.
Length: 33 pages
Date of creation: 05 Oct 2010
Date of revision: 05 Oct 2010
Publication status: Published by the University of Tasmania. Discussion paper 2010-11
Innovation; Intellectual Property Rights; Licensing;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
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