Managing technology licensing for stochastic R&D: from the perspective of an enterprise information system

Enterprise information technology (IT) plays an important role in technology innovation management for high-tech enterprises. However, to date most studies on enterprise technology innovation have assumed that the research and development (R&D) outcome is certain. This assumption does not always hold in practice. Motivated by the current practice of some IT industries, we establish a three-stage duopoly game model, including the R&D stage, the licensing stage and the output stage, to investigate the influence of bargaining power and technology spillover on the optimal licensing policy for the innovating enterprise when the outcome of R&D is uncertain. Our results demonstrate that (1) if the licensor has low (high) bargaining power, fixed-fee (royalty) licensing is always superior to royalty (fixed-fee) licensing to the licensor regardless of technology spillover; (2) if the licensor has moderate bargaining power and technology spillover is low (high) as well, fixed-fee (royalty) licensing is superior to royalty (fixed-fee) licensing; (3) under two-part tariff licensing and the assumption of licensors with full bargaining power, if a negative prepaid fixed fee is not allowed, two-part tariff licensing is equivalent to royalty licensing which is the optimal licensing policy; if negative prepaid fixed fee is allowed, the optimal policy is two-part tariff licensing.     

Choosing the partners in the licensing alliance

I consider a situation in which the incumbent strategically adopts the licensing alliance, facing potential entrants. The queue of entrants consists of two firms, the ‘strong’ entrant and the ‘weak’ entrant, who differ in their productivities. The incumbent sets a licensing fee and offers it to the entrants. Each entrant decides whether or not to buy the licensing alliance. After the set of the licensing alliance is determined, they engage in the Cournot competition. I examine the optimal licensing fee, and show that the optimal licensing fee is to charge a discriminatory royalty to each licensee. I also examine the licensing policy on the partner(s): To whom should the licensor license its technology? By comparing the equilibrium expected payoffs for the licensor, I show that licensing to both entrants would be preferred to licensing to a single entrant. But, if the licensor faces the problem on choosing the partner, he prefers the licensing of the weak entrant to the strong entrant. Copyright © 2006 John Wiley & Sons, Ltd.     

Markets for standardized technologies: Patent licensing with principle of proportionality

In this paper, we study the licensing of standard-related patents among companies that employ a two-level licensing model where (i) the aggregated value of technology in the end product is divided among the integrated technologies in the product, and (ii) the value of each technology is then shared among the patent owners in proportion to the strengths of their patent portfolios in these technologies. Specifically, we develop a system dynamics simulation model for analyzing the effects of licensing costs on product and technology markets. This model is based on the modeling of three types of companies whose interactions are analyzed using non-cooperative game theory. The numerical results suggest that none of the three companies benefit from very low or very high royalty rates. In this setting, our model for two-level proportional sharing of licensing payments helps identify royalty rates which benefit all types of companies and which provide incentives for technology development and innovation.     

Licensing standard-essential patents with costly enforcement

We study the interaction between the holder of a standard-essential patent (SEP) and two downstream firms using the patented technology to design standard-compliant products. The SEP holder approaches the downstream firms simultaneously in the shadow of patent litigation and is subject to fair, reasonable, and non-discriminatory licensing requirements. We show that the patent holder faces a litigation credibility constraint and a license acceptability constraint when setting its licensing terms. For patents of intermediate strength, there is no royalty that allows the patent holder to reconcile these constraints. Consequently, it cannot license its technology and must go to court against infringers. We show that the availability of an injunction improves the patent holder's ability to license its technology, but it tends to inflate the royalty rate for implementers.     

Estimation of patent licensing value using a flexible demand specification

A patent owner who is considering licensing its patent to a competitor faces a dilemma. By giving a license to the competitor, the patent owner stands to lose profits due to increased competition. In order to be willing to license, therefore, the patent owner must receive a royalty that at least compensates for these lost profits. The minimum acceptable royalty depends upon the competitive impact the potential licensee's product would have on the patent owner's product. We describe how to estimate econometrically this competitive impact and how a patent owner might use this information to determine the minimum acceptable royalty. We discuss the advantages of using a flexible functional form for the demand system specification that underlies the competitive analysis. Finally, using an empirical example, we illustrate the large differences that can arise between results based on flexible forms versus non-flexible forms.     

标准化组织专利政策采用事先披露原则的利弊分析及改进模式探讨

技术标准涉及专利的对外许可一直都是在标准制定完成之后由专利权人或标准化组织与使用方谈判确定。VITA推出的新专利政策中在世界范围内第一次采用了事先披露原则,要求专利权人在标准制定之前,不仅要披露专利信息,还需披露许可条件。虽然这一专利政策草案通过了美国司法部的反垄断审查,但依然引起广泛争议。本文对事先披露原则的利弊进行了分析,在此基础上探讨了对事先披露许可费模式的改进思路——由标准化组织事先披露总许可费率的模式。     

Job auctions and hold-ups

We consider a labor market with search frictions in which firms need to invest in capital before they can post a vacancy. This assumption creates a natural scope for hold-up problems, but the innovation of our study is that we allow for competition among the applicants who apply for the same job. In our economy all applicants are paid their actual marginal product. Nonetheless, with random search there exists a hold-up problem, leading to underinvestment in capital. On the contrary, if workers can direct their search towards firms with different capital levels, the equilibrium is efficient. This result contrasts sharply with the predictions of models with ex-post bargaining that never yield an efficient allocation. Moreover, our results extend the efficiency of auction mechanisms to an environment with non-contractible investments.     

Chapter 11 bankruptcy and the termination of collective bargaining contracts

In 1984 the Supreme Court ruled that employers can unilaterally break an existing collective bargaining contract upon filing a chapter 11 bankruptcy petition. This ruling changed both the contractual responsibilities of the employer to honor the collective bargaining agreement and the rights that workers have under the National Labor Relations Act. The purpose of this article is to show the conditions under which a Chapter 11 bankruptcy proceeding will lead to the termination of a labor contract. Our results suggest that (a) legal rulings that reduce the costs of bankruptcy will increase the number of contractual dissolutions and (b) a Chapter 11 bankruptcy is more likely to occur when a firm operates in a climate of uncertain expectations.     

拍卖交易机制研究

探讨了常用的拍卖方式之间的联系以及他们各自适用的经济环境，研究了拍卖交易机制的特征     

Determinants of licensing activities of local public technology centers in Japan

Local public technology centers are publicly managed institutions that facilitate technology transfer to small local firms. As well as providing small local firms with various technological services, local public technology centers conduct their own research and patent inventions. This study examines factors facilitating licensing activities and finds that the determinants vary according to the phase of technology transfer. Employing more Ph.D. scientists tends to promote the licensing of patents, while organizational efforts that encourage scientists to better understand the technological needs of small local firms tend to increase royalty revenue. The theoretical and practical implications of the results are discussed.     

Auctions with resale and bargaining power

We show that when the weak bidder’s bargaining power in the resale market is weakened, the auctioneer’s revenue from the first-price auction with resale is lower. Using the idea of Coase Theorem, we show that when the resale market is a sequential bargaining model with no commitment, the auctioneer’s revenue is substantially reduced, and the ranking is the opposite of Hafalir and Krishna (2009). We establish a version of the Coase Theorem in the context of the auctions with resale. When Coase Theorem holds, we show that the revenue of the auction with resale is lower than the revenue of the same auction without resale. We also provide the existence and uniqueness of equilibrium for our model of auctions with resale.     

Informality in developing economies: Regulation and fiscal policies

This paper proposes a unified theoretical framework where formal and informal firms coexist and face the same type of product and labor market imperfections: they have monopoly power in the goods market, they are subject to matching frictions in the labor market, and wages are determined by bargaining between large firms and their workers, through either individual or collective bargaining. Our model matches the main stylized facts on informality for developing countries and appears to be a good candidate for policy analysis. In this framework, we study the impact on informality, wages and unemployment of policies that may be used to reduce informality. We consider changes in product market regulation (PMR) and in two types of fiscal policies, labor taxes and formality enforcement. We find that lessening PMR decreases informality and unemployment simultaneously, indicating that there is not necessarily a tradeoff between informality and unemployment. The tradeoff appears when fiscal policies are used, though. Moreover, the impacts of PMR on unemployment and on wages are larger under collective than individual bargaining. With respect to wage inequality, lessening PMR reduces it, while lower taxes tend to increase the formal sector wage premium.     

Investment, expropriation, and unionization

In this paper, I examine an economy where output is produced from labor, capital and public services, and where firms and labor unions bargain over labor conditions and lobby the government over union bargaining power and public services. I compare three institutional cases: (a) competitive wage settlement, (b) bargaining over wages and employment, and (c) bargaining over wages only. I show that in cases (a) and (b) the government expropriates investment rents, but right-to-manage bargaining (c) protects investors from this expropriation.      

Dynamic Effects of Patent Policy on Sequential Innovation

When one patented innovation enables another, endogenous delay of the latter has important implications for the economics of patent life and scope, if licensing is negotiated ex post. Optimal patent life may be finite under competition, even if the royalty imposes no deadweight loss and there is no competitive dissipation of rent. Reduced scope of the first patent eliminates delay of costly enabled innovations, whether monopolized or competitive, and a combination of limited scope and infinite life can be optimal. If the second innovation is negotiated ex ante, its patentability can increase or decrease the first innovator's profit, depending on cost and market structure of the second innovation, and patent life.     

Incumbency and R&D Incentives: Licensing the Gale of Creative Destruction

This paper analyzes the relationship between incumbency and R&D incentives in the context of a model of technological competition in which technologically successful entrants are able to license their innovation to (or be acquired by) an incumbent. That such a sale should take place is natural, since postinnovation monopoly profits are greater than the sum of duopoly profits. We identify three key findings about how innovative activity is shaped by licensing. First, since an incumbent's threat to engage in imitative R&D during negotiations increases its bargaining power, there is a purely strategic incentive for incumbents to develop an R&D capability. Second, incumbents research more intensively than entrants as long as (and only if) their willingness to pay for the innovation exceeds that of the entrant, a condition that depends critically on the expected licensing fee. Third, when the expected licensing fee is sufficiently low, the incumbent considers entrant R&D a strategic substitute for in-house research. This prediction about the market for ideas stands in contrast to predictions of strategic complementarity in patent races where licensing is not allowed.     

Panel data estimates of the production function and product and labor market imperfections

Consistent with two models of imperfect competition in the labor market—the efficient bargaining model and the monopsony model—we provide two extensions of a microeconomic version of Hall's framework for estimating price‐cost margins. We show that both product and labor market imperfections generate a wedge between factor elasticities in the production function and their corresponding shares in revenue, which can be characterized by a ‘joint market imperfections parameter’. Using an unbalanced panel of 10,646 French firms in 38 manufacturing industries over the period 1978–2001, we can classify these industries into six different regimes depending on the type of competition in the product and the labor market. By far the most predominant regime is one of imperfect competition in the product market and efficient bargaining in the labor market (IC‐EB), followed by a regime of imperfect competition in the product market and perfect competition or right‐to‐manage bargaining in the labor market (IC‐PR), and by a regime of perfect competition in the product market and monopsony in the labor market (PC‐MO). For each of these three predominant regimes, we assess within‐regime firm differences in the estimated average price‐cost mark‐up and rent sharing or labor supply elasticity parameters, following the Swamy methodology to determine the degree of true firm dispersion. To assess the plausibility of our findings in the case of the dominant regime (IC‐EB), we also relate our industry and firm‐level estimates of price‐cost mark‐up and extent of rent sharing to industry characteristics and firm‐specific variables respectively. Copyright © 2011 John Wiley & Sons, Ltd.     

Household debt and labor market fluctuations

The co-movements of labor productivity with output, total hours, vacancies and unemployment have changed since the mid 1980s. This paper offers an explanation for the sharp break in the fluctuations of labor market variables based on endogenous labor supply decisions following the mortgage market deregulation. We set up a search model with efficient bargaining and financial frictions, in which impatient borrowers can take an amount of credit that cannot exceed a proportion of the expected value of their real estate holdings. When borrowers' equity requirements are low, the impact of a positive technology shock on the marginal utility of consumption is strengthened, which in turn results in lower hours per worker and higher wages in the bargaining process. This shift in labor supply discourages firms from opening vacancies, reducing the impact of the shock on employment. We simulate the effects of an increase in both the loan-to-value ratio and the share of borrowers in total population. Our exercise shows that the response of labor market variables might have been substantially affected by the increase in household leverage in the US in the last twenty years.     

Licensing and innovation with imperfect contract enforcement

Licensing promotes technology transfer and innovation, but enforcement of licensing contracts is often imperfect. We model contract enforcement as a game with perfect information but probabilistic enforcement and explore the implications of weak enforcement on the design of licensing contracts, the conduct of firms, and market performance. An upstream firm develops a technology that it can license to downstream firms using a fixed fee and a per‐unit royalty. Strictly positive per‐unit royalties maximize the licensor's profit if competition among licensees limits joint profits. With imperfect enforcement, the licensor lowers variable royalties to avoid cheating. Although imperfect contract enforcement reduces the profits of the licensor, weak enforcement lowers prices, increases downstream innovation, and in some circumstances can increase total economic welfare.     

A non-Walrasian labor market in a monetary model of the business cycle

This paper investigates to what extent a new Keynesian, monetary model with the addition of a microfounded, non-Walrasian labor market solely based on union bargaining is able to replicate key aspects of the business cycle. The presence of a representative union offers an explanation for two features of the cycle. First, it generates an endogenous mechanism which produces persistent responses to both supply and demand shocks. Second, labor unionization reduces the elasticity of marginal costs to output. This leads to lower inflation volatility. Model simulations show that the unionized framework can better reproduce European business cycle data than can a model with a competitive labor market.     

Supply-Side Innovation and Technology Commercialization

The majority of research and practice tends to conceptualize innovation as a vertically coupled, intra-organizational process. We expand this perspective by conceptualizing innovation as a vertically decoupled, inter-organizational process and by studying the role of research universities as suppliers of discoveries to this market for innovation . We combined logic from agency and real options theories to explain why the outcomes of technology commercialization are a function of licensing strategies, the autonomy of technology licensing offices (TLOs), and the incentives bestowed on scientists, research departments, and TLO officers. We rely on data from licensing surveys, interviews with 128 TLO directors, and – for convergent validity – from web-based searches of the TLOs of American universities and the US Patent and Trademark Office. Results suggest that commercialization outcomes (in this case, revenue and start-up creation) are enhanced when TLOs employ diverse licensing strategies, TLOs enjoy greater autonomy, universities share revenues with scientists' departments, and universities compensate TLOs officers well. Results also show that late entrants – typically underperforming universities – inflate royalty shares to scientists as a means to rectify their commercialization record. We conclude with a discussion of this study's contribution to the literature on innovation and technology commercialization.