Licensing in the Presence of Competing Technologies

Business Economics Series 14, Working Paper No. 98-72

36 Pages Posted: 16 Nov 1998

See all articles by Ashish Arora

Ashish Arora

Duke University - Fuqua School of Business; National Bureau of Economics Research; Duke Innovation & Entrepreneurship Initiative

Andrea Fosfuri

Universidad Carlos III de Madrid - Department of Business Administration

Date Written: October 1998

Abstract

In technology-based industries, many incumbent firms license their technology to other firms that will potentially compete with them. Such a strategy is difficult to explain within traditional models of licensing. This paper extends the literature on licensing by relaxing the widespread assumption of a unique technology holder. We develop a model with many technological trajectories for the production of a differentiated good. We find that competition in the market for technology induces licensing of innovations, and that the number of licenses can be inefficiently large. A strong testable implication of our theory is that the number of licenses per patent holder decreases with the degree of product differentiation.

JEL Classification: D45, L1, O34

Suggested Citation

Arora, Ashish and Fosfuri, Andrea, Licensing in the Presence of Competing Technologies (October 1998). Business Economics Series 14, Working Paper No. 98-72, Available at SSRN: https://ssrn.com/abstract=138524 or http://dx.doi.org/10.2139/ssrn.138524

Ashish Arora

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

National Bureau of Economics Research

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Andrea Fosfuri (Contact Author)

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

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