Innovation contracts with leakage through licensing

Shane Evans ()
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Shane Evans: School of Economics and Finance, University of Tasmania, http://www.utas.edu.au/economics-finance/

No 10282, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

Abstract: In this paper a Developer contracts with a Researcher for the production of a non-drastic innovation. Since effort is non-contractible, the Developer offers an incentive contract dependent on the observed magnitude of the innovation. It is shown that the distribution of intellectual property rights (IPR) ownership does not affect the level of effort exerted for innovations where the Developer would choose to license the innovation to its competitors. This is because the possibility of leakage of the innovation through licensing subsidies the Developer's payment when IPR is delegated to the Researcher, while at the same time eroding its profit.

Keywords: Innovation; Intellectual Property Rights; Licensing (search for similar items in EconPapers)
JEL-codes: D23 L24 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2010-10-05, Revised 2010-10-05
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Published by the University of Tasmania. Discussion paper 2010-11

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