Optimal Patenting and Licensing of Financial Innovations

Praveen Kumar and Stuart M. Turnbull ()
Additional contact information
Stuart M. Turnbull: C. T. Bauer College of Business, University of Houston, Houston, Texas 77204

Management Science, 2008, vol. 54, issue 12, 2012-2023

Abstract: Recent court decisions, starting with the State Street decision in 1998, allow business methods to be patentable and now give financial institutions the option to seek patent protection for financial innovations. This new patentability paradigm and the heterogeneity of characteristics associated with financial innovations pose an immediate decision problem for senior management: what to patent. We present a parsimonious decision framework that answers this question. We show that for innovations with certain characteristics, it is optimal not to patent, even if the option of patenting and licensing is available. Our model emphasizes the role of embedded real options that arise from certain types of financial innovations. The model provides an explanation of observed patenting behavior of financial institutions and the success of a wide class of innovations, including swaps, credit derivatives, and pricing algorithms.

Keywords: business methods; financial innovations; patents; licenses; real options (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.1080.0898 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:54:y:2008:i:12:p:2012-2023

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().