Patents and Business Models for Software Firms
John R. Allison
University of Texas - McCombs School of Business
University of Texas at Austin - Department of Economics
Ronald J. Mann
Columbia University - Law School
March 24, 2006
U of Texas Law, Law and Econ Research Paper No. 77
We analyze the relation between patents and the different business models available to firms in the software industry. The paper builds on Cusumano's work defining the differences among firms that sell products, those that provide services, and the hybrid firms that fall between those polar categories. Combining data from five years of Software Magazine's Software 500 with data about the patenting practices of those software firms, we analyze the relation between the share of revenues derived from product sales and the firm's patenting practices. Accounting for size, R&D intensity, and sector-specific effects, the paper finds a robust positive correlation between product-based business models and patenting rates. We also present in this draft preliminary results suggesting that there is no significant relation between patenting practices and the extent to which the firm's revenues are derived from software products and services, as opposed to hardware or other lines of business.
Number of Pages in PDF File: 39
Keywords: patent, business, software, IP, model
JEL Classification: K20, K29, L10
Date posted: April 11, 2006
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