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on Innovation |
| By: | Rey, Patrick; Salant, David |
| Abstract: | Patent thickets, layers of licenses a firm needs to be able to offer products that embody technologies owned by multiple firms, and licensing policies have drawn increasing scrutiny from policy makers. Patent thickets involve complementary products, which gives rise to double marginalization -- the so-called royalty stacking problem -- and has the potential to retard diffusion of new technologies and reduce consumer welfare. This paper examines the impact of licensing policies of one or more upstream owners essential} intellectual property (IP) on the downstream firms that require access to that IP. The terms under which downstream firms can access this IP affects entry decisions, product diversity, prices and welfare. We consider both the case in which a single party controls the essential IP and the case in which different parties control complementary pieces of essential IP. We compare the outcome of several alternative standard licensing arrangements, such as flat rate access fees, royalty percentages, per unit fees, patent pools and cross-licensing arrangements, with or without vertical integration. We first consider the case where there is a single upstream owner of essential IP. Increasing the number of licenses enhances product variety, which creates added value, but it also intensifies downstream competition, which dissipates profits. We derive conditions under which the upstream IP monopoly will then want to provide an excessive or insufficient number of licenses, relative to the number that maximizes consumer surplus or social welfare. When there are multiple owners of essential IP, royalty stacking can reduce the number of the downstream licensees, but also the downstream equilibrium prices the consumers face. The paper derives conditions determining whether this reduction in downstream price and variety is beneficial to consumers or society. Finally, the paper explores the impact of alternative licensing policies. With fixed license fees or royalties expressed as a percentage of the price, an upstream IP owner cannot control the intensity of downstream competition. In contrast, volume-based license fees (i.e., per-unit access fees), do permit an upstream owner to control downstream competition and to replicate the outcome of complete integration. The paper also shows that vertical integration can have little impact on downstream competition and licensing terms when IP owners charge fixed or volume-based access fees. |
| Keywords: | Patents; Vertical Integration |
| JEL: | D43 L22 L40 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:9454&r=ino |
| By: | Heli Koski |
| Abstract: | ABSTRACT : This study does not find any significant direct relationship between the public R&D funding and the firms` innovation output. The firms obtaining the public R&D support were not performing significantly better, on average, than others. However, we find evidence that the public R&D finance has substantially influenced the innovation output of the firms that have undertaken certain types of innovations activities. Particularly, public funding targeted to the firms focusing on new business areas in their R&D projects seems successful. Certain types of collaboration seem to also generate better entrepreneurial performance in terms of innovation. Those large firms that have more intensively collaborated with the SMS firm partners in their publicly funded R&D projects have filed more patent applications than other companies. |
| Keywords: | innovation, public R&D subsidies, technology policy |
| JEL: | L10 O33 O38 |
| Date: | 2008–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:rif:dpaper:1142&r=ino |
| By: | Elad Harison; Heli Koski |
| Abstract: | ABSTRACT : The primary findings of our study suggest that software firms that adopt the OSS-based business model are notably less productive than companies that merely offer proprietary software solutions. Our estimation results further show that the OSS business model adopters have not become notably less productive after beginning to supply OSS. Therefore, its seems that not the use of the OSS business model as such has reduced the OSS firms’ labour productivity but the firms that employed the OSS business model during the sampled years were, on average, of lower labour productivity type. Though the OSS business model use has not substantially improved the performance of software firms, we find that the OSS business model adopters strategically using the source code made available by the OSS community as part of their new software products, have performed better in terms of labour productivity than other adopters of the OSS business model. |
| Date: | 2008–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:rif:dpaper:1135&r=ino |
| By: | Nobuaki Hamaguchi (Research Institute for Economics and Business Administration, Kobe University); Yoshihiro Kameyama (The International Centre for the Study of East Asian Development (ICSEAD)) |
| Abstract: | This paper presents an analysis of the effects of dense communication of industry-university-government cooperation on enhancing in-house (a company's own) R&D activities in Korean and Chinese knowledge-based industrial clusters: the Seoul Digital Industrial Complex, Daedeok Valley, and the Zhongguancun Science Park. Our unique survey data enable us to examine firms' communication behaviors, i.e., communication frequency, participants, and purposes, related to the choice of communication mode. Results of this study demonstrate that agglomeration might impart least two influences on an individual firm: agglomeration stimulates more in-house R&D through exchange of ideas; and it reduces in-house R&D by promoting its outsourcing. |
| Keywords: | agglomeration, communication externalities, industrial cluster, Seoul Digital Industrial Complex, Daedeok Valley, Zhongguancun Science Park |
| JEL: | O32 R11 O40 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:206&r=ino |
| By: | Faria, Pedro; Sofka, Wolfgang |
| Abstract: | International knowledge spillovers, especially through multinational companies (MNCs), have recently been a major topic of discussion among academics and practitioners. Most research in this field focuses on knowledge sharing activities of MNC subsidiaries. Relatively little is known about their capabilities for protecting valuable knowledge from spilling over to host country competitors. We extend this stream of research by investigating MNC appropriability strategies that go beyond formal methods (patents, copyrights, trademarks) to include strategic ones (secrecy, lead time, complex design). We conceptualize the breadth and depth of a firm’s knowledge protection strategies and relate them to the particular situation of MNC subsidiaries. Moreover, we argue that their approaches differ with regard to host country challenges and opportunities. We address these issues empirically, based on a harmonized survey of innovation activities of more than 1,800 firms located in Portugal and Germany. We find that MNCs prefer broader sets of appropriability strategies in host countries with fewer opportunities for knowledge sourcing. However, munificent host country environments require targeted sets of appropriability strategies instead. We deduce that these results are due to a need for reciprocity to benefit fully from promising host country knowledge flows. |
| Keywords: | Appropriability, Multinational Companies, Patenting |
| JEL: | D83 F23 O31 O32 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:7302&r=ino |
| By: | T. VANACKER; S. MANIGART; M. MEULEMAN |
| Abstract: | Using multiple longitudinal case studies of young biotechnology firms, we study differences in the financing process between high and low performing firms. Findings suggest that initial differences in the specialization of the investors with whom entrepreneurs affiliate early on, affect the ease with which firms attract (specialized) follow-on financing and firm performance. We demonstrate the role of the social context in shaping initial financing outcomes, as entrepreneurs limit their search for financing to one or a few investors with whom they have pre-existing ties. Additionally, our research provides a dynamic view of the financing process. We identify isolating mechanisms, including entrepreneurial learning and homophily and network considerations in investor syndication, which limit entrepreneurs when trying to adopt successful financing strategies implemented by competitors later on. A core contribution is that we theorize on evolutionary processes in the financing process. This new perspective advances our knowledge on dynamics in the financing process and opens multiple avenues for future research. |
| Keywords: | entrepreneurship; new venture finance; financing process; venture capital; performance |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:08/522&r=ino |
| By: | GAVIN C REID; JULIA A SMITH |
| Abstract: | The paper uses a range of primary-source empirical evidence to address the question: ‘why is it to hard to value intangible assets?’ The setting is venture capital investment in high technology companies. While the investors are risk specialists and financial experts, the entrepreneurs are more knowledgeable about product innovation. Thus the context lends itself to analysis within a principal-agent framework, in which information asymmetry may give rise to adverse selection, pre-contract, and moral hazard, post-contract. We examine how the investor might attenuate such problems and attach a value to such high-tech investments in what are often merely intangible assets, through expert due diligence, monitoring and control. Qualitative evidence is used to qualify the more clear cut picture provided by a principal-agent approach to a more mixed picture in which the ‘art and science’ of investment appraisal are utilised by both parties alike. |
| Keywords: | venture capital, high technology, accounting information, intangible assets, financial reporting. |
| JEL: | G11 G24 M41 O3 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:0806&r=ino |