Managing Licensing in a Market for Technology

Ashish Arora (ashish.arora@duke.edu), Andrea Fosfuri and Thomas Roende

No 18203, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Over the last decade, companies have paid greater attention to the management of their intellectual assets. We build a model that helps understand how licensing activity should be organized within large corporations. More specifically, we compare decentralization--where the business unit using the technology makes licensing decisions--to centralized licensing. The business unit has superior information about licensing opportunities but may not have the appropriate incentives because its rewards depend upon product market performance. If licensing is decentralized, the business unit forgoes valuable licensing opportunities since the rewards for licensing are (optimally) weaker than those for product market profits. This distortion is stronger when production-based incentives are more powerful, making centralization more attractive. Growth of technology markets favors centralization and drives higher licensing rates. Our model conforms to the existing evidence that reports heterogeneity across firms in both licensing propensity and organization of licensing.

JEL-codes: L2 L24 O32 (search for similar items in EconPapers)
Date: 2012-07
New Economics Papers: this item is included in nep-bec, nep-com, nep-ino, nep-ipr, nep-pr~ and nep-tid
Note: PR
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Citations: View citations in EconPapers (1)

Published as “Managing licensing in a market for technology” (with Andrea Fosfuri and Thomas Roende). May 2013. Management Science. 59(5):1092-1106.

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Related works:
Journal Article: Managing Licensing in a Market for Technology (2013)
Working Paper: Managing licensing in a market for technology (2012)
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