Why do Patents Facilitate Trade in Technology? Testing the Disclosure and Appropriation Effects

28 Pages Posted: 7 Feb 2013 Last revised: 1 May 2016

See all articles by Gaétan de Rassenfosse

Gaétan de Rassenfosse

Ecole Polytechnique Fédérale de Lausanne

Alfons Palangkaraya

Centre for Transformative Innovation, Faculty of Business and Law, Swinburne University of Technology

Elizabeth Webster

Swinburne University of Technology; University of Melbourne - Melbourne Institute: Applied Economic & Social Research

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2016

Abstract

Evidence suggests that patents facilitate technology transactions but the reasons for the effect are unclear. Patents may assist trade in technology by either: (i) protecting buyers against the expropriation of the idea (the ‘appropriation effect’); or (ii) increasing information sharing during the negotiation phase through publication of technical details contained in the patent document (the ‘disclosure effect’). We estimate the strength of both effects using exact matching analysis on a novel dataset of 860 technology transaction negotiations. We find evidence for the appropriation but not the disclosure effect. Technology transaction negotiations involving a granted patent instead of a pending patent (our test for the appropriation effect) are significantly more likely to be successfully completed. The appropriation effect is stronger in technology fields where patent protection is known to be more effective such as biotech, chemicals, drugs and medical.

Keywords: Appropriability, Disclosure, Licensing, Market for technology, Patent

JEL Classification: O32, O34

Suggested Citation

de Rassenfosse, Gaétan and Palangkaraya, Alfons and Webster, Elizabeth M., Why do Patents Facilitate Trade in Technology? Testing the Disclosure and Appropriation Effects (January 1, 2016). Available at SSRN: https://ssrn.com/abstract=2213107 or http://dx.doi.org/10.2139/ssrn.2213107

Gaétan De Rassenfosse (Contact Author)

Ecole Polytechnique Fédérale de Lausanne ( email )

Station 5
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1015 Lausanne, CH-1015
Switzerland

Alfons Palangkaraya

Centre for Transformative Innovation, Faculty of Business and Law, Swinburne University of Technology ( email )

AGSE Building
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Hawthorne, Victoria 3121
Australia
+61392145826 (Phone)

Elizabeth M. Webster

Swinburne University of Technology ( email )

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3122 Victoria, Victoria 3122
Australia

University of Melbourne - Melbourne Institute: Applied Economic & Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

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