Deals Not Done: Sources of Failure in the Market for Ideas

32 Pages Posted: 28 Nov 2013 Last revised: 14 Mar 2015

See all articles by Ajay Agrawal

Ajay Agrawal

University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Iain M. Cockburn

Boston University Questrom School of Business; National Bureau of Economic Research (NBER)

Laurina Zhang

Georgia Institute of Technology - Scheller College of Business

Date Written: November 2013

Abstract

Using novel survey data on technology licensing, we report the first empirical evidence linking the three main sources of failure emphasized in the market design literature (lack of market thickness, congestion, lack of market safety) to deal outcomes. We disaggregate the licensing process into three stages and find that although lack of market thickness and deal failure are correlated in the first stage, they are not in the latter stages, underscoring the bilateral monopoly conditions under which negotiations over intellectual property often occur. In contrast, market safety is only salient in the final stage. Several commonly referenced bargaining frictions (congestion) are salient, particularly in the second stage. Also, universities and firms differ in the stage during which they are most likely to experience deal failure.

Suggested Citation

Agrawal, Ajay and Cockburn, Iain M. and Zhang, Laurina, Deals Not Done: Sources of Failure in the Market for Ideas (November 2013). NBER Working Paper No. w19679. Available at SSRN: https://ssrn.com/abstract=2360947

Ajay Agrawal (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Iain M. Cockburn

Boston University Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States
617-353-3775 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Laurina Zhang

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

HOME PAGE: http://https://laurinazhang.wordpress.com/

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