IP-for-IP or Cash-for-IP? R&D Competition and the Market for Technology

Patrick Herbst () and Eric Jahn ()
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Patrick Herbst: University of Stirling
Eric Jahn: University of Cooperative Education Dresden

Review of Industrial Organization, 2017, vol. 51, issue 1, No 4, 75-101

Abstract: Abstract We analyze how firms might benefit from trading restrictions in the market for technology. We show that restricting trade to reciprocal exchange (“IP-for-IP” barter instead of cash transactions), as in cross-licensing agreements, alters the allocation of R&D resources and reduces overinvestment in R&D. The tighter are the trading restrictions, the higher are the costs that are due to forgone gains from trade. Our analysis of the trade-offs involved shows that firms benefit from IP-for-IP restrictions, compared to both free trade and no trade environments, in industries where: (1) firms differ in their capabilities to commercialize IP; and (2) patent complementarities exist.

Keywords: Intellectual property; R&D competition; IP-for-IP; Cross-licensing; Technology trade (search for similar items in EconPapers)
JEL-codes: L11 O31 O32 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s11151-016-9542-z

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