Licensing Tacit Knowledge: Intellectual Property Rights And The Market For Know-How

Ashish Arora ()

Economics of Innovation and New Technology, 1995, vol. 4, issue 1, 41-60

Abstract: Technology transfer involves more than just the permission to use knowledge covered by patents; the transfer of know-how is critical to the successful utilization of the transferred technology. However, know-how is typically difficult to codify, costly to transfer, and hence, difficult to contract upon. Using a principal-agent model I show that simple arms length contracts can accomplish the transfer know-how. The key to the success of arms length contracts is the complementarity between know-how and patents. The model explains why patents and know-how are bundled together in licensing contracts. It shows why licensing has limitations as a strategy for appropriating rents from innovation. The paper points to the key role that patent scope plays in determining the efficiency of know-how transfer and shows that broader patents can improve the efficiency of technology transfer, even when important components of the technology (know-how) are not protected by patents.

Keywords: Know-how; licensing; patents J.E.L. classification: 034; L14 (search for similar items in EconPapers)
Date: 1995
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Citations: View citations in EconPapers (138)

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DOI: 10.1080/10438599500000013

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