Shirking, Sharing Risk, and Shelving: The Role of University License Contracts

Marie Thursby, Jerry Thursby () and Emmanuel Dechenaux

No 11128, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we develop a theoretical model of university licensing to explain why university license contracts often include payment types that differ from the fixed fees and royalties typically examined by economists. Our findings suggest that milestone payments and annual payments are common because moral hazard, risk sharing, and adverse selection all play a role when embryonic inventions are licensed. Milestones address inventor moral hazard without the inefficiency inherent in royalties. The potential for a licensee to shelve inventions is an adverse selection problem which can be addressed by annual fees if shelving is unintentional, but may require an upfront fee if the firm licenses an invention with the intention to shelve it. Whether the licensing contract prevents shelving depends in part on the university credibly threatening to take the license back from a shelving firm. This supports the rationale for Bayh-Dole march-in rights but also shows the need for the exercise of these rights can be obviated by contracts.

JEL-codes: D82 L14 O3 (search for similar items in EconPapers)
Date: 2005-02
New Economics Papers: this item is included in nep-ino
Note: PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Dechenaux, Emmanuel & Thursby, Marie & Thursby, Jerry, 2009. "Shirking, sharing risk and shelving: The role of university license contracts," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 80-91, January.

Downloads: (external link)
http://www.nber.org/papers/w11128.pdf (application/pdf)

Related works:
Journal Article: Shirking, sharing risk and shelving: The role of university license contracts (2009)
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:nbr:nberwo:11128

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w11128

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().