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License Expenditures of Incumbents and Potential Entrants: An Empirical Analysis of Firm Behavior

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  • Czarnitzki, Dirk
  • Kraft, Kornelius

Abstract

This paper presents the results of an empirical test concerning the auction model of Gilbert and Newbery (1982). The study uses data on German companies in order to analyze expenditures for technology licenses. Aside of standard control variables the motives for innovation expenditures are also taken into account. We differentiate between firms which intend to secure their present position in the market (incumbents) and those intending to enter a new market (challengers). In line with the prediction of the auction model, it turns out that incumbents show higher expenditures for technology licenses than potential entrants. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 05-35.

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Date of creation: 2005
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Handle: RePEc:zbw:zewdip:3189

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Related research

Keywords: Innovation; Licenses; Incumbent versus entrant; Limited Dependent Variables;

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References

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  1. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 94(2), pages 429-36, March.
  2. Kamien, Morton I., 1992. "Patent licensing," Handbook of Game Theory with Economic Applications, Elsevier, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 11, pages 331-354 Elsevier.
  3. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  4. Kamien, Morton I & Tauman, Yair, 1986. "Fees versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 101(3), pages 471-91, August.
  5. Reinganum, Jennifer F, 1984. "Practical Implications of Game Theoretic Models of R&D," American Economic Review, American Economic Association, American Economic Association, vol. 74(2), pages 61-66, May.
  6. Krishna, Kala, 1993. "Auctions with Endogenous Valuations: The Persistence of Monopoly Revisited," American Economic Review, American Economic Association, American Economic Association, vol. 83(1), pages 147-60, March.
  7. Reinganum, Jennifer F, 1985. "Innovation and Industry Evolution," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(1), pages 81-99, February.
  8. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, American Economic Association, vol. 72(3), pages 514-26, June.
  9. Albert Link & John Scott, 2002. "Explaining Observed Licensing Agreements: Toward a Broader Understanding of Technology Flows," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(3), pages 211-231.
  10. Ravenscraft, David J, 1983. "Structure-Profit Relationships at the Line of Business and Industry Level," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 22-31, February.
  11. Collins, Norman R & Preston, Lee E, 1969. "Price-Cost Margins and Industry Structure," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 271-86, August.
  12. Acs, Zoltan J & Audretsch, David B, 1988. "Innovation in Large and Small Firms: An Empirical Analysis," American Economic Review, American Economic Association, American Economic Association, vol. 78(4), pages 678-90, September.
  13. N Dryden & Stephen Nickell & D Nicolitsas, 1996. "What Makes Firms Perform Well?," CEP Discussion Papers dp0308, Centre for Economic Performance, LSE.
  14. Czarnitzki, Dirk & Kraft, Kornelius, 2000. "An empirical test of the asymmetric models on innovative activity: who invests more into R&D - the incumbent or the challenger?," ZEW Discussion Papers 00-10, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  15. Salant, Stephen W, 1984. "Preemptive Patenting and the Persistence of Monopoly: Comment," American Economic Review, American Economic Association, American Economic Association, vol. 74(1), pages 247-50, March.
  16. Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, American Economic Association, vol. 73(4), pages 741-48, September.
  17. Arora, Ashish & Fosfuri, Andrea, 1999. "Licensing the Market for Technology," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2284, C.E.P.R. Discussion Papers.
  18. Boone, J., 2000. "Competitive pressure: The effects on investments in product and process innovation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-84400, Tilburg University.
  19. Chen, Yongmin, 2000. "Strategic Bidding by Potential Competitors: Will Monopoly Persist?," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 48(2), pages 161-75, June.
  20. Kamien, Morton I & Tauman, Yair, 2002. "Patent Licensing: The Inside Story," Manchester School, University of Manchester, vol. 70(1), pages 7-15, January.
  21. Anand, Bharat N & Khanna, Tarun, 2000. "The Structure of Licensing Contracts," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 48(1), pages 103-35, March.
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Cited by:
  1. Iain M. Cockburn & Megan J. MacGarvie & Elisabeth Müller, 2010. "Patent thickets, licensing and innovative performance," Industrial and Corporate Change, Oxford University Press, vol. 19(3), pages 899-925, June.
  2. Etro, Federico, 2008. "Growth leaders," Journal of Macroeconomics, Elsevier, Elsevier, vol. 30(3), pages 1148-1172, September.

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