Real Options in Technology Licensing
This paper examines the use of options contracts by firms acquiring rights to commercialize university technologies. By combining information about the sequence of licensing decisions with characteristics of the firms and technologies involved, I explore factors that shape decisions to purchase and exercise option contracts for these technologies. Decisions by firms that considered but did not purchase an option or a license are included in the sample. Consistent with the basic premise of real-options theory, I find that firms are more likely to purchase option contracts for more uncertain technologies. Also in line with theoretical predictions, I find that firms that are better able to evaluate an external technology are less likely to purchase options before licensing. The results also highlight more complex motives for exercising options in technology licensing. On the one hand, firms appear to benefit from their ability to learn about the technology during the option period. On the other hand, firms that are better able to "absorb" the technology during the contract period may have reduced incentives to subsequently license the invention.
Volume (Year): 53 (2007)
Issue (Month): 10 (October)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
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.:
- Lanjouw, Jean O & Schankerman, Mark, 2001. "Characteristics of Patent Litigation: A Window on Competition," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 129-151, Spring.
- Roberts, Kevin & Weitzman, Martin L, 1981.
"Funding Criteria for Research, Development, and Exploration Projects,"
Econometric Society, vol. 49(5), pages 1261-1288, September.
- M. L. Weitzman & K. Roberts, 1979. "Funding Criteria for Research, Development and Exploration Projects," Working papers 234, Massachusetts Institute of Technology (MIT), Department of Economics.
- David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters,in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87 World Scientific Publishing Co. Pte. Ltd..
- Teece, David J., 1986. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 15(6), pages 285-305, December.
- Teece, David J., 1993. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 22(2), pages 112-113, April.
- David J. Teece, 2003. "Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy," World Scientific Book Chapters,in: Essays In Technology Management And Policy Selected Papers of David J Teece, chapter 2, pages 11-46 World Scientific Publishing Co. Pte. Ltd..
- Majd, Saman & Pindyck, Robert S., 1987. "Time to build, option value, and investment decisions," Journal of Financial Economics, Elsevier, vol. 18(1), pages 7-27, March.
- Saman Majd & Robert S. Pindyck, 1985. "Time to Build, Option Value, and Investment Decisions," NBER Working Papers 1654, National Bureau of Economic Research, Inc.
- Hausman, Jerry & McFadden, Daniel, 1984. "Specification Tests for the Multinomial Logit Model," Econometrica, Econometric Society, vol. 52(5), pages 1219-1240, September.
- D. McFadden & J. Hausman, 1981. "Specification Tests for the Multinominal Logit Model," Working papers 292, Massachusetts Institute of Technology (MIT), Department of Economics.
- Ashish Arora & Marco Ceccagnoli, 2006. "Patent Protection, Complementary Assets, and Firms' Incentives for Technology Licensing," Management Science, INFORMS, vol. 52(2), pages 293-308, February.
- Robert A. Lowe & Arvids A. Ziedonis, 2006. "Overoptimism and the Performance of Entrepreneurial Firms," Management Science, INFORMS, vol. 52(2), pages 173-186, February.
- Scott Shane, 2001. "Technology Regimes and New Firm Formation," Management Science, INFORMS, vol. 47(9), pages 1173-1190, September.
- Bruce Kogut, 1991. "Joint Ventures and the Option to Expand and Acquire," Management Science, INFORMS, vol. 37(1), pages 19-33, January.
- Jaffe, Adam B., 1989. "Characterizing the "technological position" of firms, with application to quantifying technological opportunity and research spillovers," Research Policy, Elsevier, vol. 18(2), pages 87-97, April.
- Mowery, David C. & Oxley, Joanne E. & Silverman, Brian S., 1998. "Technological overlap and interfirm cooperation: implications for the resource-based view of the firm," Research Policy, Elsevier, vol. 27(5), pages 507-523, September.
- Anand, Bharat N & Khanna, Tarun, 2000. "The Structure of Licensing Contracts," Journal of Industrial Economics, Wiley Blackwell, vol. 48(1), pages 103-135, March.
- Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 707-727.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
- Arora, Ashish & Gambardella, Alfonso, 1994. "Evaluating technological information and utilizing it : Scientific knowledge, technological capability, and external linkages in biotechnology," Journal of Economic Behavior & Organization, Elsevier, vol. 24(1), pages 91-114, June.
- Nathan ROSENBERG, 2009. "Why do firms do basic research (with their own money)?," World Scientific Book Chapters,in: Studies On Science And The Innovation Process Selected Works of Nathan Rosenberg, chapter 11, pages 225-234 World Scientific Publishing Co. Pte. Ltd..
- Rosenberg, Nathan, 1990. "Why do firms do basic research (with their own money)?," Research Policy, Elsevier, vol. 19(2), pages 165-174, April.
- Richard Nelson, 1962. "Introduction to "The Rate and Direction of Inventive Activity: Economic and Social Factors"," NBER Chapters,in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 1-16 National Bureau of Economic Research, Inc.
- Cynthia A. Montgomery & Birger Wernerfelt, 1988. "Diversification, Ricardian Rents, and Tobin's q," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 623-632, Winter.
- Bruce Kogut & Nalin Kulatilaka, 1994. "Operating Flexibility, Global Manufacturing, and the Option Value of a Multinational Network," Management Science, INFORMS, vol. 40(1), pages 123-139, January.
- Narin, Francis & Noma, Elliot & Perry, Ross, 1987. "Patents as indicators of corporate technological strength," Research Policy, Elsevier, vol. 16(2-4), pages 143-155, August.
- Caves, Richard E & Crookell, Harold & Killing, J Peter, 1983. "The Imperfect Market for Technology Licenses," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 45(3), pages 249-267, August.
- Brian S. Silverman, 1999. "Technological Resources and the Direction of Corporate Diversification: Toward an Integration of the Resource-Based View and Transaction Cost Economics," Management Science, INFORMS, vol. 45(8), pages 1109-1124, August. Full references (including those not matched with items on IDEAS)