Knowledge disclosure, patents and optimal organization of research and development

Sudipto Bhattacharya and Sergei Guriev

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We develop a model of two-stage cumulative research and development (R&D), in which one Research Unit (RU) with an innovative idea bargains to license her nonverifiable interim knowledge exclusively to one of two competing Development Units (DUs) via one of two alternative modes: an Open sale after patenting this interim knowledge, or a Closed sale in which precluding further disclosure to a competing DU requires the RU to hold a stake in the licensed DU’s post-invention revenues. Both models lead to partial leakage of RU’s knowledge from it’s description, to the licensed DU alone in a closed sale, and to both DUs in an open sale. We find that higher levels of interim knowledge are more likely to be licensed via closed sales. If the extent of leakage is lower, more RUs choose open sales, generating a non-monotonic relationship between the strength of Intellectual Property Rights (IPR) and aggregate R&D expenditures. We also develop a rationale for the ex ante acquisition of control rights over the RU by a DU, rooted in the RU’s incentives to create knowledge under alternative modes of sale thereof, and her wealth constraint in ex interim bargaining.

Keywords: R&D organisation; patents; intellectual property rights (search for similar items in EconPapers)
JEL-codes: D23 O32 O34 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2004-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://eprints.lse.ac.uk/19315/ Open access version. (application/pdf)

Related works:
Working Paper: Knowledge Disclosure, Patents and Optimal Organization of Research and Development (2004)
Working Paper: Knowledge Disclosure, Patents and Optimal Organization of Research and Development (2004)
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:ehl:lserod:19315

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().