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Why do patents facilitate trade in technology? Testing the disclosure and appropriation effects

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  • de Rassenfosse, Gaétan
  • Palangkaraya, Alfons
  • Webster, Elizabeth

Abstract

Evidence suggests that patents facilitate technology transactions but the reasons for the effect are unclear. Patents may assist trade in technology by either: (i) protecting buyers against the expropriation of the idea (the ‘appropriation effect’); or (ii) increasing information sharing during the negotiation phase through publication of technical details contained in the patent document (the ‘disclosure effect’). We estimate the strength of both effects using exact matching analysis on a novel dataset of 860 technology transaction negotiations. We find evidence for the appropriation but not the disclosure effect. Technology transaction negotiations involving a granted patent instead of a pending patent (our test for the appropriation effect) are significantly more likely to be successfully completed. The appropriation effect is stronger in technology fields where patent protection is known to be more effective such as biotech, chemicals, drugs and medical.

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  • de Rassenfosse, Gaétan & Palangkaraya, Alfons & Webster, Elizabeth, 2016. "Why do patents facilitate trade in technology? Testing the disclosure and appropriation effects," Research Policy, Elsevier, vol. 45(7), pages 1326-1336.
  • Handle: RePEc:eee:respol:v:45:y:2016:i:7:p:1326-1336
    DOI: 10.1016/j.respol.2016.03.017
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    8. Nemlioglu, Ilayda & Mallick, Sushanta K., 2020. "Do innovation-intensive firms mitigate their valuation uncertainty during bad times?," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 913-940.
    9. Zaby, Alexandra Karin & de Rassenfosse, Gaétan, 2016. "The Economics of Patent Backlog," VfS Annual Conference 2016 (Augsburg): Demographic Change 145673, Verein für Socialpolitik / German Economic Association.
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    More about this item

    Keywords

    Appropriability; Disclosure; Licensing; Market for technology; Patent;
    All these keywords.

    JEL classification:

    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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