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

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Author Info
Ralph Siebert (Purdue University, Department of Economics, Krannert School of Management, 403 West State Street, West Lafayette, IN 47907-2056. rsiebert@purdue.edu)
Georg von Graevenitz (Ludwig Maximilians University, Munich School of Management, INNO-tec, Kaulbachstraße 45, D-80539,Munich. graevenitz@bwl.uni-muenchen.de)

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Abstract

In a patent thicket licensing provides a mechanism to either avoid or resolve hold-up. Firms’ R&D incentives will differ depending on how licensing is used. In this paper we study the choice between ex ante licensing to avoid hold-up and ex post licensing to resolve it. Building on a theoretical model of a patent portfolio race, firms’ choices of licensing contracts are modelled. We derive several hypotheses from the model and find support for these using data from the semiconductor industry. The empirical results show that firms’ relationships in product markets and technology space jointly determine the type of licensing contract chosen. Implications for the regulation of licensing are discussed. We estimate a dynamic panel data model with unobserved heterogeneity and a lagged dependent variable. A method suggested by Wooldridge (2005) is employed to estimate a random effects probit model using conditional maximum likelihood.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 105.

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Date of creation: Apr 2006
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Handle: RePEc:trf:wpaper:105

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Related research
Keywords: Hold-Up Problem; Licensing; Innovation; Patent Race; Patent Thicket;

Other versions of this item:

Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other
L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  3. Bo E. Honoré & Ekaterini Kyriazidou, 2000. "Panel Data Discrete Choice Models with Lagged Dependent Variables," Econometrica, Econometric Society, vol. 68(4), pages 839-874, July.
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    Other versions:
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ralph Siebert & Georg von Graevenitz, 2006. "Jostling for Advantage: Licensing and Entry into Patent Portfolio Races," Discussion Papers 184, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  2. 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. [Downloadable!]
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