Vertical integration and the licensing of innovation with a fixed fee or a royalty

Stéphane Lemarié

Working Papers from Grenoble Applied Economics Laboratory (GAEL)

Abstract: In this paper, we analyse a situation where a patent holder is considered as an upstream firm that can license its innovation to some downstream companies that compete on a final market with differentiated products. Licensing contract may be based either on a royalty or a fixed fee. The patent holder can either be independant or vertically integrated with one of the downstream companies. We show that a licence based on a royalty works better with vertical integration, and that consequently, the patent holder have some interest to vertically integrate if it enables him to apply a royalty based license. The effect of vertical integration on the social surplus can be either positive or negative.

Keywords: LICENSING; INNOVATION; VERTICAL INTEGRATION (search for similar items in EconPapers)
JEL-codes: D45 L22 L42 O31 O32 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-com, nep-ino and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:gbl:wpaper:200517

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