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Licensing the market for technology

  • Arora, Ashish
  • Fosfuri, Andrea

In technology-based industries, incumbent firms often license their technology to other firms that will potentially compete with them. Such a strategy is difficult to explain within traditional models of licensing. This paper extends the literature on licensing by relaxing the assumption of a monopolist technology holder. We develop a model with many technological trajectories for the production of a differentiated good. We find that competition in the market for technology induces licensing of innovations, and that the number of licenses can be inefficiently large. A strong testable implication of our theory is that the number of licenses per patent holder decreases with the degree of product differentiation.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 52 (2003)
Issue (Month): 2 (October)
Pages: 277-295

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Handle: RePEc:eee:jeborg:v:52:y:2003:i:2:p:277-295
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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