The Effects of Downstream Competition on Upstream Innovation and Licensing

64 Pages Posted: 9 Mar 2014 Last revised: 26 Nov 2019

See all articles by Jean-Etienne de Bettignies

Jean-Etienne de Bettignies

Queen's University - Smith School of Business

Bulat Gainullin

Gulf Capital

Hua Fang Liu

Queen's University - Smith School of Business

David T. Robinson

Fuqua School of Business, Duke University; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Multiple version iconThere are 2 versions of this paper

Date Written: November 25, 2019

Abstract

We study how competition between two downstream firms affects an upstream innovator's innovation strategy, which includes selecting how much innovation to produce and whether to license this innovation to one (targeted licensing) or both (market-wide licensing) downstream competitors. Our model points to a U-shaped relationship between downstream competition and upstream innovation: at low levels of competition, market-wide licensing is optimal and competition reduces innovation, while at high levels of competition targeted licensing is optimal and competition increases innovation. Empirical analysis using a large panel of US data provides clear support for these predictions linking competition, innovation and licensing.

Keywords: Competition, Licensing, Innovation, Import Tariffs

JEL Classification: L22, L24, O31, O32

Suggested Citation

de Bettignies, Jean-Etienne and Gainullin, Bulat and Liu, Hua Fang and Robinson, David T., The Effects of Downstream Competition on Upstream Innovation and Licensing (November 25, 2019). Available at SSRN: https://ssrn.com/abstract=2400839 or http://dx.doi.org/10.2139/ssrn.2400839

Jean-Etienne De Bettignies (Contact Author)

Queen's University - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Bulat Gainullin

Gulf Capital ( email )

Level 25, Al Sila Tower
Abu Dhabi Global Market Square
Abu Dhabi, 313
United Arab Emirates

Hua Fang Liu

Queen's University - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

David T. Robinson

Fuqua School of Business, Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-8023 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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