Appropriability and the Timing of Innovation: Evidence from Mit Inventions

32 Pages Posted: 1 Jun 2003 Last revised: 8 Aug 2022

See all articles by Emmanuel Dechenaux

Emmanuel Dechenaux

Kent State University - Department of Economics

Brent Goldfarb

University of Maryland - Robert H. Smith School of Business

Marie C. Thursby

Georgia Institute of Technology - Strategic Management Area; National Bureau of Economic Research (NBER)

Scott Shane

Case Western Reserve University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 2003

Abstract

At least since Arrow (1962), the effects of appropriability on invention have been well studied, but there has been little analysis of the effect of appropriability on the commercialization of existing inventions. Exploiting a database of 805 attempts by private firms to commercialize inventions licensed from MIT between 1980 and 1996, we explore the influence of several appropriability mechanisms on the commercialization and termination of projects to develop products based on university inventions. Our central hypothesis is that the relationship between a licensee's decision to either terminate or commercialize the invention is driven by the current market value of the invention, as well as the option value of delaying its commercialization. We use a competing risks framework that allows for non- parametric heterogeneity and correlated risks. We find that better appropriability in the sense of more effective patent strength and secrecy has a strong negative effect on the hazard of license termination. The effectiveness of learning has a strong positive effect on the hazard of technology commercialization, while lead time has a negative effect.

Suggested Citation

Dechenaux, Emmanuel and Goldfarb, Brent D. and Thursby, Marie C. and Shane, Scott A., Appropriability and the Timing of Innovation: Evidence from Mit Inventions (May 2003). NBER Working Paper No. w9735, Available at SSRN: https://ssrn.com/abstract=412368

Emmanuel Dechenaux

Kent State University - Department of Economics ( email )

Kent, OH 44242
United States

Brent D. Goldfarb

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States
301-405-9672 (Phone)
301-314-8787 (Fax)

Marie C. Thursby (Contact Author)

Georgia Institute of Technology - Strategic Management Area ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Scott A. Shane

Case Western Reserve University - Department of Economics ( email )

Cleveland, OH 44106
United States

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