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Appropriability and the timing of innovation: Evidence from MIT inventions

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  • Emmanuel Dechenaux
  • Brent Goldfarb
  • Scott A. Shane
  • Marie C. Thursby

Abstract

At least since Arrow (1962), the effects of appropriability on invention have been well studied, but there has been little analysis of the effect of appropriability on the commercialization of existing inventions. Exploiting a database of 805 attempts by private firms to commercialize inventions licensed from MIT between 1980 and 1996, we explore the influence of several appropriability mechanisms on the commercialization and termination of projects to develop products based on university inventions. Our central hypothesis is that the relationship between a licensee's decision to either terminate or commercialize the invention is driven by the current market value of the invention, as well as the option value of delaying its commercialization. We use a competing risks framework that allows for non- parametric heterogeneity and correlated risks. We find that better appropriability in the sense of more effective patent strength and secrecy has a strong negative effect on the hazard of license termination. The effectiveness of learning has a strong positive effect on the hazard of technology commercialization, while lead time has a negative effect.

Suggested Citation

  • Emmanuel Dechenaux & Brent Goldfarb & Scott A. Shane & Marie C. Thursby, 2003. "Appropriability and the timing of innovation: Evidence from MIT inventions," NBER Working Papers 9735, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9735 Note: PR
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    References listed on IDEAS

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    1. Richard Jensen, 2003. "Innovative leadership: First-mover advantages in new product adoption," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(1), pages 97-116, January.
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    Cited by:

    1. Macho-Stadler, Ines & Perez-Castrillo, David & Veugelers, Reinhilde, 2007. "Licensing of university inventions: The role of a technology transfer office," International Journal of Industrial Organization, Elsevier, pages 483-510.
    2. C. Praag & Peter Versloot, 2007. "What is the value of entrepreneurship? A review of recent research," Small Business Economics, Springer, vol. 29(4), pages 351-382, December.
    3. 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, pages 982-997.
    4. Anna Conte & Daniela T. Di Cagno & Emanuela Sciubba, 2015. "Behavioral Patterns In Social Networks," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 1331-1349, April.
    5. Rothaermel, Frank T. & Thursby, Marie, 2005. "Incubator firm failure or graduation?: The role of university linkages," Research Policy, Elsevier, pages 1076-1090.
    6. Elfenbein, Daniel W., 2007. "Publications, patents, and the market for university inventions," Journal of Economic Behavior & Organization, Elsevier, vol. 63(4), pages 688-715, August.
    7. Debackere, Koenraad & Veugelers, Reinhilde, 2005. "The role of academic technology transfer organizations in improving industry science links," Research Policy, Elsevier, pages 321-342.
    8. Buenstorf, Guido & Schacht, Alexander, 2013. "We need to talk – or do we? Geographic distance and the commercialization of technologies from public research," Research Policy, Elsevier, pages 465-480.
    9. Nicola Lacetera, 2009. "Academic entrepreneurship," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(7), pages 443-464.
    10. Veugelers, Reinhilde & Cassiman, Bruno, 2005. "R&D cooperation between firms and universities. Some empirical evidence from Belgian manufacturing," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 355-379, June.
    11. 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, pages 982-997.
    12. Murat F. Iyigun & X. Maggie Chen, 2004. "Strategic R&D Delays Generate Market Power," Econometric Society 2004 North American Summer Meetings 213, Econometric Society.
    13. Alexander Schacht, 2012. "Commercializing inventions from public research: Does speed matter?," Jena Economic Research Papers 2012-026, Friedrich-Schiller-University Jena.

    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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