Licensing cost-reducing innovations under supply function competition

In this paper, we study the licensing of cost-reducing innovations in a duopoly under supply function competition. We show that the innovator prefers fixed-fee licensing to no licensing if its cost advantage is not extremely large. Moreover, if its cost advantage is not extremely small, the innovator prefers fixed-fee licensing and mixed licensing to revenue-royalty licensing. This second result arises only because of our assumption that the cost functions are quadratic. We show that if the cost functions are linear and royalty payments are per unit of output, the innovator strictly prefers royalty licensing to fixed-fee licensing. We also show that in our model, consumer surplus is remarkably higher under any type of licensing than under no licensing. However, revenue-royalty licensing is slightly superior for consumers to the other two types of licensing and only so if the cost advantage of the innovator is sufficiently large.     

Licensing a quality-enhancing innovation to an upstream firm

This paper examines the case where a patent holder who is not a producer licenses its quality-enhancing innovation to an upstream firm, which sells its product through a downstream monopoly. It is found that the patent holder prefers a two-part tariff contract, which includes both a fixed-fee and per-unit output royalty. However, the royalty included in the licensing contract makes each firm price at a markup over marginal cost and therefore makes both consumers and the society worse off, if the innovation is small and the supplier is weak. From a welfare perspective, licensing by means of an ad valorem tax is more efficient, as it allows the upstream firm to be less aggressive when trading with the downstream firm.     

Why some product innovations are licensed and others are not?

We study in a Stackelberg industry the licensing of a product that embodies an innovation (quality-improving product) whose owner may be the firm that plays as a leader or a follower in setting output in the the product market. We find that the innovation is transferred (and social welfare is reduced) if its owner is the market-leader firm. However, if the innovation is in the hands of the market-follower firm, it is not licensed, even though licensing would be welfare enhancing. Thus, subsidizing R&D with the mandatory licensing of the resulting innovation may be a socially desirable policy.     

FEE VERSUS ROYALTY POLICY IN LICENSING THROUGH BARGAINING: AN APPLICATION OF THE NASH BARGAINING SOLUTION

In this paper, we consider a Cournot duopoly market in which the patent‐holding firm negotiates with its rival firm about payments for licensing a cost‐reducing innovation. Applying the Nash bargaining solution, we compare two licensing policies, a fixed fee and a royalty. Our results are as follows. Royalty licensing is better than fixed fee licensing for both firms if the innovation is not drastic. So, royalty licensing is always carried out. Moreover, though there exists a case in which consumers prefer fixed fee licensing, royalty licensing is always superior to fixed fee licensing from the social point of view.     

Entry restrictions and the determination of quality

Entry restrictions are a common form of regulation in markets and occupations, either as a means of limiting the size of a market or affecting the quality of products or services provided by it. This paper analyzes demand, cost and informational characteristics that affect the impact of this type of policies on the quality mix of products provided by an industry and the welfare of its consumers. Selective increases in the costs of entry such as licensing requirements and direct restrictions with competitive bidding for entry rights are considered. We analyze the effects of these policies on entry decisions and also the additional selection effects that are obtained when exit is allowed for and the rights to participate in an industry can be freely traded.     

Optimal patent licensing—Two or three-part tariff

We look into technology transfer by an insider patentee in a spatial duopoly model under three types of licensing contracts—(i) two-part tariff with fixed fee and per-unit royalty, (ii) two-part tariff with fixed fee and ad-valorem royalty and (iii) general three-part tariff with fixed fee, per-unit and ad-valorem royalties. Under two-part tariff contracts, the licenser is better off with the per-unit royalty contract but the general contract does better than the other contracts. In contrast to the existing literature, all three licensing contracts may make the consumers worse-off compared to no licensing, with the lowest consumer surplus achieved under the general licensing contract. Welfare under the general licensing contract is equal to the welfare under two-part tariff with ad-valorem royalty and it is higher than the welfare under no licensing but lower than the welfare under two-part tariff with per-unit royalty. Hence, the general three-part licensing contract is privately optimal but not socially optimal. Similar conclusions hold also under a nonspatial linear demand model with differentiated products.     

‘More is different’, exaptation and uncertainty: three foundational concepts for a complexity theory of innovation

Universities are engaging in more licensing and patenting activities than ever before, and the amount of research funded by industry is increasing. Academics’ commercialization activities may inhibit traditional academic scholarship. If the output of such scholarship is an important input into technological innovation and economic growth, then such an inhibition would be cause for concern. We introduce new instruments and techniques and demonstrate them using a novel panel dataset of academic electrical engineers from Stanford University. We find no evidence that engaging in inventive activity reduces the quantity of scientific output and some evidence that it increases its quality.     

Commitment and excess capacity with licensing: an old debate with a new look

The theoretical literature demonstrates that excess capacity is not an equilibrium phenomenon if each firm’s marginal revenue decreases with the competitor’s output. We show that such a conclusion can be overturned in the presence of technology licensing. We show that in the presence of technology licensing, a firm may hold excess capacity because it increases the benefit from technology licensing.     

Endogenous Market Structure and Technology Licensing

This paper analyses the optimal licensing strategy of a licensor firm that competes with potential licensee firms in an industry with endogenous entry. The optimal licensing strategy of the licensor firm is to have zero royalty and positive fixed fees, which is a result that sharply contrasts with the existing literature whereby licensor firms tend to charge positive royalties to their rival licensees. Under the optimal licensing strategy, the licensor firm and the licensee firms are active in the market, but not the non‐licensed firms. This equilibrium market structure is socially desirable if the fixed production cost is not too small.     

Tariff induced licensing contracts,consumers’ surplus and welfare

We construct a duopolistic trade model with technology transfer and consider two-part tariff licensing contracts. We show that a tariff on foreign products can influence the licensing strategy of the foreign firm. There is a trade-off between a tariff and a royalty license in affecting the product price. We show in particular that a tariff can be chosen so as to induce fee licensing and maximize both consumers’ surplus and domestic welfare. This resolves the so-called conflict between these two objectives in respect of the choice of a tariff. The paper provides a number of testable hypothesis.     

Does a strong patent regime discourage innovation?

Does a strengthening of the patent regime impact R&;D expenditure? For the US semiconductor industry, a strengthening of the patent regime in the 1980s was followed by a sharp increase in patenting but had almost no impact on R&;D expenditure. This paper attempts to understand this patent paradox by taking some of the industry features into account. We present a model of invention and product development in complex industries where product development involves putting together a large number of inventions and where licensing of patentable inventions is common. While a stronger patent regime leads to higher patenting in both in presence and absence of licensing, the positive relationship between patenting and R&;D is weakened in presence of licensing since licensing provides an alternative way of accessing inventions. A stronger patent regime, therefore, may only create weak incentives to increase R&;D, while strongly increasing patenting activities in such an industry.     

三螺旋互动下专利联营促进成果转化的许可优势研究

在世界产业竞争格局下,基于许可进行成果转化的专利联营日渐成为高新技术产业竞争和发展的主导范式。传统的纵向结构专利联营由于必要专利权人来源单一,已经出现了许可困境,不利于必要专利的转化,而基于大学-产业-政府三螺旋互动创新的专利联营有利于合理配置资源,有效促进必要专利的转化。对三螺旋互动下专利联营促进成果转化的许可优势进行研究发现,与纵向结构专利联营相比,三螺旋互动下专利联营具备促进成果转化的许可动力优势、许可契约优势和许可市场优势等多维优势,具体表现在：多元来源的必要专利可持久的资本化特性保证了许可动力强劲,契约双方的合作共赢目标保证了许可契约的顺利达成,容易形成事实标准保证了许可市场的有效占领。     

考虑革新程度认知差异的新产品技术授权研究

建立博弈模型，探讨技术革新认知差异情形下，外部技术创新者向寡占竞争格局的生产企业授权生产新产品专利的最优决策问题。研究发现，创新授权者关于新产品市场的认知劣势使固定收费契约不具备完全优于特许权收费契约的绝对优势；在双重收费契约下，专利人授权对象选择因认知差异影响，由排他性授权向非排他性授权决策转变；认知差异性削弱了创新企业市场势力，从而提高特许权收费契约优势，而拍卖、股权投资等有助于创新企业克服认知劣势。据此，建议创新企业明晰创新专利长期回报，综合搭配应用多种授权契约；以非排他性授权策略配合特许权收费、双重收费和股权投资等契约模式，实现技术交易产业链激励共容下的利润最大化，促进技术创新传播应用，提高社会福利水平。     

专利联营对外许可冲突：焦点、国际化解经验及改善路径

专利联营是国家技术转移体系基础架构的有机组成部分,也是高新技术产业的重要技术来源。随着技术进步和创新主体的多样化发展,专利联营核心专利组合的市场价值能否实现已经成为专利联营对外许可冲突的焦点。以专利联营对外许可冲突焦点为研究对象,建立合作博弈模型,得出被许可人获得许可后的经济利益净增值、专利联营的对外许可费底线和被许可人缴纳的许可费底线是影响专利联营核心专利组合市场价值实现的3个重要关联因素。通过借鉴国际活跃专利联营的先进经验,指出核心专利质量不高、对外许可效率低下是本土专利联营核心专利组合市场价值无法实现的主要障碍。在此基础上,立足专利联营供给侧角度,从自主创新能力、政产学研合作和人力资源建设3个方面提出本土专利联营满足被许可人需求、化解对外许可冲突的有效路径。     

ON TECHNOLOGY LICENSING IN A STACKELBERG DUOPOLY

This paper finds that in a linear Stackelberg duopoly model, the follower is more likely to license a cost-reducing innovation to the leader than the leader is to the follower, regardless of whether licensing is in the form of a fixed fee or royalty per unit of output. Under fixed-fee licensing, the follower gains more from small innovations while the leader gains more from large non-drastic innovations. Under royalty licensing, the follower always gains more than the leader from an innovation.     

On contract duration of royalty licensing contracts

This paper explores how the choice of royalties and contract duration can be a device to mitigate opportunistic behavior in the presence of asymmetric information. It presents a model where an upstream patent holder with no production capabilities licenses a product innovation, by means of royalty-only contracts, to several downstream firms that produce and market the new product. In a two-period signaling model, the profitability of short-term and long-term contracts is compared, given that the licensees’ costs may be inferred by observation of their output levels. For a sufficiently large difference in production costs, the patentee introduces a series of short-term contracts, rather than a long-term contract for the entire expected lifetime of the innovation. In such a sequence of contracts, both high- and low-cost firms pay the same royalty rate (which is not higher than that of long-term contracts) and reveal their costs in the first licensing period. Thereafter, royalties are smaller (than in the first period) for high-cost firms but larger for low-cost producers so as to increase expected total output and licensing income. Overall, royalties are not time-decreasing, in expected terms, as information evolves from incomplete to complete. This strategy is typically welfare-improving.     

Are Faculty Critical? Their Role in University–Industry Licensing

Understanding the nature of the involvement of faculty in university licensing is important for understanding how technology is transferred through licensing as well as more controversial issues, such as the need for university licensing. Using data from a survey of firms that actively license in from universities, the authors explore the importance of faculty in the licensing and development of inventions, as well as how and why they are used and how the use of faculty relates to characteristics of firms. In particular, the authors find that the use of faculty through sponsored research in lieu of a license is closely related to the amount of basic research conducted by firms, whereas the use of faculty within the terms of a license is related to the prevalence of personal contacts between industry research and development researchers and university faculty. (JEL J44 , 031 )     

Technology licensing under optimal tax policy

This paper examines the role of government policy in technology licensing decision. We show that both the outside and the inside innovators license a new product (or drastic process innovation) to all potential licensees in the presence of tax/subsidy policies. An implication of our analysis is that a monopolist producer may prefer technology licensing in a homogeneous goods industry. Our results also provide a rationale for franchising to multiple sellers.     

Wasted waste: An evolutionary perspective on industrial by-products

Every production process gives rise to unintended outputs. We argue that whether an output is desired or undesired, is not given per se, but depends on the economic circumstances which change over time. As a result, by-products of one industry, first perceived as non-marketable wastes, may become desired inputs into other production processes. By adopting an evolutionary perspective on economic dynamics, in particular by exploiting the concept of niche exclusion, we identify favorable circumstances for undesired outputs to become marketable. To cope with the pace and unpredictability of economic evolution, we argue for a flexible policy system which favors outcome- over process-oriented waste management policies and balances the responsibility between consumers and producers on the one side, and the society as a whole on the other side.     

Niche overlap and limiting similarity: an ecological approach to the theory of the firm

This paper suggests an approach, based upon an analogy with different species competing in the environment for fixed resources, to the question of why variety is such a persistent feature of free market economies. Attention is centred upon a market characterised by a group of consumers with a distribution of incomes, which leads to a continuum of demands for different output qualities. The identification of various sufficient conditions then allows the argument to proceed through a mathematical structure first outlined in the theoretical ecology literature, resulting in a precise prediction regarding the limit to similarity between firms. This results is then applied to the U.K. Supermarket industry in 1988, and is used to provide guidance to the state of competition within the industry in that year.