Innovation Contracts with Leakage Through Licensing

Shane Evans ()

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

Abstract: In this paper a Developer contracts with a Researcher for the production of a non-drastic innovation. Since effort is non-contractible, the Developer offers an incentive contract dependent on the observed magnitude of the innovation. It is shown that the distribution of intellectual property rights (IPR) ownership does not affect the level of effort exerted for innovations where the Developer would choose to license the innovation to its competitors. This is because the possibility of leakage of the innovation through licensing subsidies the Developer's payment when IPR is delegated to the Researcher, while at the same time eroding its profit.

JEL-codes: D23 L24 (search for similar items in EconPapers)
Pages: 34 Pages
Date: 2010-10
New Economics Papers: this item is included in nep-cta, nep-ino, nep-ipr, nep-pr~, nep-reg and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:acb:cbeeco:2010-530

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