Inefficiencies in the sale of ideas: theory and empirics
The sale of ideas (e.g. through licensing) facilitates vertical specialization and the division of labor between research and development. This specialization can improve the overall efficiency of the innovative process. However, these gains depend on the timing of the sale: the buyer of an idea should assume development at the stage at which he has an efficiency advantage. We show that in an environment with asymmetric information about the value of the idea and where this asymmetry decreases as the product is developed, the seller of the idea may delay the sale to the more efficient firm, thus incurring higher development costs. We obtain a condition for the equilibrium timing of the sale and examine how factors such as the intensity of competition between potential buyers influence it. Empirical analysis of licensing contracts signed between firms in the pharmaceutical industry supports our theoretical predictions.
|Date of creation:||08 Nov 2011|
|Note:||View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00639128|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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.:
- Marie-Laure Allain & Emeric Henry & Margaret K. Kyle, 2011.
"Inefficiencies in technology transfer: theory and empirics,"
Sciences Po publications
8206, Sciences Po.
- Allain, Marie-Laure & Henry, Emeric & Kyle, Margaret K, 2011. "Inefficiencies in technology transfer: theory and empirics," CEPR Discussion Papers 8206, C.E.P.R. Discussion Papers.
- Vishwasrao, Sharmila, 2007.
"Royalties vs. fees: How do firms pay for foreign technology?,"
International Journal of Industrial Organization,
Elsevier, vol. 25(4), pages 741-759, August.
- Sharmila Vishwasrao, 2004. "Royalties vs. fees: How do firms pay for foreign technology?," Working Papers 04023, Department of Economics, College of Business, Florida Atlantic University, revised Sep 2006.
- Howard Smith & John Thanassoulis, 2009.
"Upstream Competition and Downstream Buyer Power,"
Economics Series Working Papers
420, University of Oxford, Department of Economics.
- Sean Nicholson, 2005.
"Biotech-Pharmaceutical Alliances as a Signal of Asset and Firm Quality,"
The Journal of Business,
University of Chicago Press, vol. 78(4), pages 1433-1464, July.
- Sean Nicholson & Patricia M. Danzon & Jeffrey S. McCullough, 2002. "Biotech-Pharmaceutical Alliances as a Signal of Asset and Firm Quality," NBER Working Papers 9007, National Bureau of Economic Research, Inc.
- Beggs, A. W., 1992. "The licensing of patents under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 171-191, June.
- Motta,Massimo, 2004.
Cambridge University Press, number 9780521016919, December.
- Josh Lerner & Ulrike Malmendier, 2005.
"Contractibility and the Design of Research Agreements,"
NBER Working Papers
11292, National Bureau of Economic Research, Inc.
- Josh Lerner & Ulrike Malmendier, 2010. "Contractibility and the Design of Research Agreements," American Economic Review, American Economic Association, vol. 100(1), pages 214-246, March.
- Joshua S. Gans & David H. Hsu & Scott Stern, 2007.
"The Impact of Uncertain Intellectual Property Rights on the Market For Ideas: Evidence From Patent Grant Delays,"
NBER Working Papers
13234, National Bureau of Economic Research, Inc.
- Joshua S. Gans & David H. Hsu & Scott Stern, 2008. "The Impact of Uncertain Intellectual Property Rights on the Market for Ideas: Evidence from Patent Grant Delays," Management Science, INFORMS, vol. 54(5), pages 982-997, May.
- Lerner, Josh & Merges, Robert P, 1998. "The Control of Technology Alliances: An Empirical Analysis of the Biotechnology Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(2), pages 125-156, June.
- Pedro Mendi, 2003.
"The Structure of Payments in Technology Transfer Contracts: Evidence from Spain,"
Faculty Working Papers
05/03, School of Economics and Business Administration, University of Navarra.
- Pedro Mendi, 2005. "The Structure of Payments in Technology Transfer Contracts: Evidence from Spain," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(2), pages 403-429, 06.
- Choi, Jay Pil, 1996.
"Technology Transfer with Moral Hazard,"
22, Institute for Advanced Studies.
- Higgins, Matthew J., 2007. "The allocation of control rights in pharmaceutical alliances," Journal of Corporate Finance, Elsevier, vol. 13(1), pages 58-75, March.
- McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-230, March.
- Anand, Bharat N & Khanna, Tarun, 2000. "The Structure of Licensing Contracts," Journal of Industrial Economics, Wiley Blackwell, vol. 48(1), pages 103-135, March.
- James J. Anton & Dennis A. Yao, 2002. "The Sale of Ideas: Strategic Disclosure, Property Rights, and Contracting," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 513-531.
- Ashish Arora & Andrea Fosfuri & Alfonso Gambardella, 2004. "Markets for Technology: The Economics of Innovation and Corporate Strategy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511819, September.
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00639128. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.