Innovation Contracts with Leakage Through Licensing
In this paper a Developer contracts with a Researcher for the production of a non-drastic innovation. Since effort is non-contractible, the Developer offers an incentive contract dependent on the observed magnitude of the innovation. It is shown that the distribution of intellectual property rights (IPR) ownership does not affect the level of effort exerted for innovations where the Developer would choose to license the innovation to its competitors. This is because the possibility of leakage of the innovation through licensing subsidies the Developer's payment when IPR is delegated to the Researcher, while at the same time eroding its profit.
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- Hernandez-Murillo, Ruben & Llobet, Gerard, 2006.
"Patent licensing revisited: Heterogeneous firms and product differentiation,"
International Journal of Industrial Organization,
Elsevier, vol. 24(1), pages 149-175, January.
- Rubén Hernández-Murillo & Gerard Llobet, 2004. "Patent licensing revisited: heterogeneous firms and product differentiation," Working Papers 2002-031, Federal Reserve Bank of St. Louis.
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