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How Licensing Resolves Hold-Up: Evidence from a Dynamic Panel Data Model with Unobserved Heterogeneity

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  • Siebert, Ralph
  • Graevenitz, Georg von

Abstract

In a patent thicket licensing provides a mechanism to either avoid or resolve hold-up. Firms' R&D incentives will differ depending on how licensing is used. In this paper we study the choice between ex ante licensing to avoid hold-up and ex post licensing to resolve it. Building on a theoretical model of a patent portfolio race, firms' choices of licensing contracts are modelled. We derive several hypotheses from the model and find support for these using data from the semiconductor industry. The empirical results show that firms' relationships in product markets and technology space jointly determine the type of licensing contract chosen. Implications for the regulation of licensing are discussed. We estimate a dynamic panel data model with unobserved heterogeneity and a lagged dependent variable. A method suggested by Wooldridge (2005) is employed to estimate a random effects probit model using conditional maximum likelihood.

Suggested Citation

  • Siebert, Ralph & Graevenitz, Georg von, 2006. "How Licensing Resolves Hold-Up: Evidence from a Dynamic Panel Data Model with Unobserved Heterogeneity," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 105, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:105
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    Citations

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    Cited by:

    1. Iain M. Cockburn & Megan J. MacGarvie & Elisabeth Müller, 2010. "Patent thickets, licensing and innovative performance," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 19(3), pages 899-925, June.
    2. Mueller, Elisabeth & Cockburn, Iain M. & MacGarvie, Megan, 2013. "Access to intellectual property for innovation: Evidence on problems and coping strategies from German firms," Research Policy, Elsevier, vol. 42(2), pages 529-541.
    3. Siebert, Ralph & Graevenitz, Georg von, 2006. "Jostling for Advantage: Licensing and Entry into Patent Portfolio Races," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 184, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    4. Galasso, Alberto, 2007. "Broad cross-license agreements and persuasive patent litigation: theory and evidence from the semiconductor industry," LSE Research Online Documents on Economics 6718, London School of Economics and Political Science, LSE Library.
    5. Alberto Galasso, 2007. "Broad Cross-License Agreements andPersuasive Patent Litigation: Theory andEvidence from the Semiconductor Industry," STICERD - Economics of Industry Papers 45, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    6. Haizhen Lin, 2010. "Do Minimum Quality Standards Improve Quality? A Case Study of the Nursing Home Industry," Working Papers 2010-01, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    7. Christian Jaag, 2013. "Intellectual Property Rights and the Future of Universal Service Obligations in Communications," Working Papers 0040, Swiss Economics.

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    More about this item

    Keywords

    Hold-Up Problem; Licensing; Innovation; Patent Race; Patent Thicket;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment

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