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Intellectual Property Rights and Contract Structure

Author

Listed:
  • Tarun Khanna

    () (Competition & Strategy Unit)

  • Bharat N. Anand

    () (Competition & Strategy Unit)

Abstract

Property rights over knowledge and its output--intellectual property rights--are often weak. We treat the strength of property rights as a primitive of the environment. We examine the effects of the strengths of these rights on the structure of contracts and relationships employed by firms in intellectual property transfers. Variation in the adequacy of property rights across industries allows us to identify these effects. Using a unique dataset assembled for this purpose, we find that firms will structure contracts to optimally circumscribe the threat of imitators. In particular, weak property rights are associated with a lower absolute and relative incidence of licensing activity, fewer licensings of prospective technologies, a higher incidence of transfers to related parties and non-exclusive contracts, and more cross-licensings. The results are not explained by unobserved heterogeneity or jointness in a licenser's decisions concerning various contractual features.

Suggested Citation

  • Tarun Khanna & Bharat N. Anand, 1996. "Intellectual Property Rights and Contract Structure," Yale School of Management Working Papers ysm37, Yale School of Management.
  • Handle: RePEc:ysm:somwrk:ysm37
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    1. repec:wip:wpaper:3 is not listed on IDEAS
    2. Jean O. Lanjouw & Mark Schankerman, 1997. "Stylized Facts of Patent Litigation: Value, Scope and Ownership," NBER Working Papers 6297, National Bureau of Economic Research, Inc.
    3. Bessy, Christian & Brousseau, Eric, 1998. "Technology licensing contracts features and diversity1," International Review of Law and Economics, Elsevier, vol. 18(4), pages 451-489, December.
    4. Arora, Ashish, 1997. "Patents, licensing, and market structure in the chemical industry," Research Policy, Elsevier, vol. 26(4-5), pages 391-403, December.
    5. Arora, Ashish & Fosfuri, Andrea, 2003. "Licensing the market for technology," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 277-295, October.
    6. Contractor, Farok J. & Ra, Wonchan, 2000. "Negotiating alliance contracts: Strategy and behavioral effects of alternative compensation arrangements," International Business Review, Elsevier, vol. 9(3), pages 271-299, June.
    7. Antelo, Manel, 2003. "Licensing a non-drastic innovation under double informational asymmetry," Research Policy, Elsevier, vol. 32(3), pages 367-390, March.
    8. Suma Athreye & Sandeep Kapur, 2015. "Capital and Technology Flows: changing technology-acquisition strategies in developing countries," Birkbeck Working Papers in Economics and Finance 1511, Birkbeck, Department of Economics, Mathematics & Statistics.
    9. Ashish Arora & Alfonso Gambardella & Enzo Rullani, 1997. "Division of Labour and the Locus of Inventive Activity," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 1(1), pages 123-140, March.
    10. Ramón Faulí-Oller & Joel Sandonís, 2001. "To Merge Or To License: Implications For Competition Policy," Working Papers. Serie AD 2001-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    11. Fauli-Oller, Ramon & Sandonis, Joel, 2003. "To merge or to license: implications for competition policy," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 655-672, May.

    More about this item

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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