Innovation, Licensing and Welfare
This paper examines how the option for licensing affects research and development (R&D) and social welfare.We find that if cost reduction from R&D is sufficiently small and there is an option of licensing, firms will do non-cooperative R&D. In absence of licensing, firms will do cooperative R&D for sufficiently small cost reduction from R&D. Whether the option for licensing increases social welfare is ambiguous. If the possibility of licensing increases probability of success in R&D significantly then welfare is higher in presence of licensing.
|Date of creation:||Feb 2002|
|Date of revision:|
|Publication status:||Published in The Manchester School, Vol. 73, 2005 pages 29-39. [ doi:10.1111/j.1467-9957.2005.00422.x ]|
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