Patent Protection, Complementary Assets, and Firms' Incentives for Technology Licensing

38 Pages Posted: 30 Dec 2004

See all articles by Ashish Arora

Ashish Arora

Duke University - Fuqua School of Business; National Bureau of Economics Research; Duke Innovation & Entrepreneurship Initiative

Marco Ceccagnoli

Scheller College of Business at Georgia Tech

Date Written: December 16, 2004

Abstract

This paper analyzes the relationship between technology licensing and the effectiveness of patent protection. Using the 1994 Carnegie Mellon survey on industrial R&D in the United States, we develop and test a simple structural model in which the patenting and licensing decisions are jointly determined. We find that increases in the effectiveness of patent protection increases licensing propensity when complementary assets required to bring new technologies to market are absent or unimportant. In contrast, for firms better positioned to bring new technologies to market, increases in patent effectiveness increases patenting propensity but reduces the propensity to license. We thus present systematic cross-industry empirical support for the proposition that the intellectual property system is a key determinant of the vertical boundaries of the firm and the market for technology.

JEL Classification: O31, O32, O34

Suggested Citation

Arora, Ashish and Ceccagnoli, Marco, Patent Protection, Complementary Assets, and Firms' Incentives for Technology Licensing (December 16, 2004). Available at SSRN: https://ssrn.com/abstract=637205 or http://dx.doi.org/10.2139/ssrn.637205

Ashish Arora

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

National Bureau of Economics Research

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

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

Marco Ceccagnoli (Contact Author)

Scheller College of Business at Georgia Tech ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

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