a dynamic analysis of licensing the boomerang effect and grant back clauses this article develops an incomplete contract model of the licensing relationship to analyze the dynamic effects of licensing on r d competition in the innovation market and to examine the rationale for often observed grant back clauses of particular concern are how the consideration of future competition distorts the licensing relationship and how the grant back clause can mitigate this distortion i also evaluate the validity of the casual antitrust argument that grant back clauses may adversely affect competition because they reduce the licensee s incentive to engage in r d and thereby limit rivalry in innovation markets

the structure of licensing contracts industrial organization theory has explored several issues related to licensing but empirical analyses are extremely rare we amass a new and detailed dataset on licensing contracts and use it to present some simple facts concerning licensing behavior our analysis reveals robust cross industries differences in several contractual features such as exclusivity cross licensing ex ante versus ex post technology transfers and licensing to related versus unrelated parties we offer an interpretation of these facts based on cross industry variation in the strength of intellectual property rights

technology is changing lending implications for research abstract costello down and mehta 2020 trace their slider intervention to deviations from the credit line amount recommended by a credit scoring model the deviations are followed by larger delinquency declines and bigger sales orders and costello et al interpret these results using discretion based theories however incremental deviations are concentrated on newer clients rather than those the lender has accumulated soft information about deviations also appear larger for public than private borrowers my discussion evaluates whether these results align with discretion based theories and explores alternative interpretations based on salience and unique aspects of the trade credit setting differences in interpretation aside the evidence is informative about technological advances in commercial lending i conclude with an overview of several recent advances and discuss the implications for lending research

royalties vs fees how do firms pay for foreign technology abstract the theoretical determinants of technology licensing contracts have been extensively studied but empirical evidence is scarce we assemble a data set of all the foreign technology licensing agreements entered into by manufacturing firms in india between 1989 and 1993 industry firm and contract characteristics are used to explain differences between the forms of payment in licensing contracts our findings support theoretical arguments licensing contracts are more likely to use royalties when sales are relatively high while increased volatility of sales and greater profitability favor fixed fee contracts we also find that firms are more likely to use output based payments to control the sale and diffusion of r d or brand intensive know how to unaffiliated firms

durable goods monopolists durable goods monopolists face special problems because the sale of their products creates a secondhand market not controlled by the monopolist to the extent the monopolist is able to rent his product rather than sell it or to make binding promises about his future production such problems are ameliorated given the inability to do the above the monopolist is led to producing goods less durable than those produced by either competitive firms or monopolist returns a reverse averch johnson result that monopolist sellers may invest less in fixed costs including plant modernization and research and development than would the renters is shown it is also shown that even though sellers have less monopoly power than renters and nondurable goods monopolists it is possible that the seller will cause a greater deadweight loss than the other types of monopolies

the licensing of patents under asymmetric information abstract this paper seeks to explain the use of royalty payments rather than fixed fees in the licensing of patents by the presence of asymmetric information the licensee is assumed to know the value of the patent and makes a single offer of a contract to the licensor it is shown that there is a unique equillibrium satisfying cho and kreps intuitive criterion qualitative properties of the equilibrium contract are derived by considering a continuum of types

risk sharing in licensing abstract this paper studies the design of linear license contracts under demand or cost uncertainty the optimal contract consists in general of a mix of a fixed fee and royalties the source of uncertainty has a crucial impact on the type of royalties that must be used in particular under demand uncertainty at most two of the instruments are used the contract generally combines a fixed fee with an ad valorem royalty when cost is uncertain a wider variety of cases can arise the contract may involve a combination of either type of royalties coupled with a fixed fee alternatively it may be optimal to use all three available instruments

earnings quality in uk private firms comparative loss recognition timeliness abstract uk private and public companies face substantially equivalent regulation on auditing accounting standards and taxes we hypothesize that private company financial reporting nevertheless is of lower quality due to different market demand regulation notwithstanding a large uk sample supports this hypothesis quality is operationalized using basu s 1997 time series measure of timely loss recognition and a new accruals based method the result is not affected by controls for size leverage industry membership and auditor size or by allowing endogenous listing choice the result enhances understanding of private companies which are predominant in the economy it also provides insight into the economics of accounting standards

agency problems auditing and the theory of the firm some evidence agency problems auditing and the theory of the firm some evidenceauthor s ross l watts and jerold l zimmermansource journal of law and economics vol 26 no 3 oct 1983 pp 613 633published by the university of chicago pressstable url http www jstor org stable 725039accessed 29 06 2008 23 14

implications for gaap from an analysis of positive research in accounting based on extant literature we review the positive theory of gaap the theory predicts that gaap s principal focus is on control performance measurement and stewardship and that verifiability and conservatism are critical features of a gaap shaped by market forces we recognize the advantage of using fair values in circumstances where these are based on observable prices in liquid secondary markets but caution against expanding fair values to financial reporting more generally we conclude that rather than converging u s gaap with ifrs competition between the fasb and the iasb would allow gaap to better respond to market forces

a measurement approach to conservatism and earnings management this paper formalizes a two step representation of accounting measurement and uses it to formalize a general rationale for conservatism as a measurement principle a transaction s economic substance manifests itself in characteristics of the transaction and an accounting rule is a mapping from transaction characteristics to an accounting report managers who have stakes in the accounting report are able to influence transaction characteristics such earnings management is ex post rational for managers but ex ante inefficient to safeguard against such ex post opportunism the optimal ex ante accounting rule is conservative in the sense that it requires more verification of the transaction characteristics favorable to managers thus this rationale for conservatism is as general as the managers ability and incentive to inflate transaction characteristics by opening the black box of accounting measurement the two step representation also formalizes some classic accounting concepts such as relevance reliability verifiability verification and accounting motivated transactions

licence contracts future exchange clauses and technological competition abstract in an incumbent challenger innovation model this paper examines to what extent licence contracts can internalize the business stealing and common pool externalities occurring in technological competition due to these negative externalities private r d investments are higher than the socially optimal ones licensing of current technology creates a replacement effect for the challenger and thus induces lower research rates special exchange clauses concerning future improvements which are often used in licensing practice partially take care of the common pool externality although the externalities are not internalized completely a grant back clause requiring the licensee to license back improvements to the original licensor can achieve a welfare improvement by reducing the r d investments in some cases below optimal levels if there are no restrictions in setting the ex post licence fee for the improvement socially optimal r d investments can be induced a mutual exchange clause stating that the original licensor must license an improvement to the licensee and vice versa induces social underinvestment in r d

choosing the competition and patent licensing this article examines licensing as a means of choosing the competitors which a patentee monopolist will face in the period after the patent expires the queue of entrants consists of two firms which differ in their relative strengths as competitors for example by size or level of marginal cost by structuring the industry to be composed of weak competitors the incumbent is able to prolong its dominant position in the industry after the patent expires examples are presented in which the evidence suggests that choosing the competition was an important motivation of the licensor s behavior

market and political regulatory perspectives on the recent accounting scandals not surprisingly the recent accounting scandals look different when viewed from the perspectives of the political regulatory process and of the market for corporate governance and financial reporting we do not have the opportunity to observe a world in which either market or political regulatory processes operate independently and the events are recent and not well researched so untangling their separate effects is somewhat conjectural this paper offers conjectures on issues such as what caused the scandalous behavior why was there such a rash of accounting scandals at one time who killed arthur andersen the securities and exchange commission or the market did fraudulent accounting kill enron or just keep it alive for too long what is the social cost of financial reporting fraud does the united states in fact operate a principles based or a rules based accounting system was there market failure or was there regulatory failure or both was the sarbanes oxley act a political and regulatory overreaction does the united states follow an ineffective regulatory model

lead markets and regulation a framework for analyzing the international diffusion of environmental innovations abstract environmental regulations are often intended to stimulate the generation and adoption of eco efficient innovations an important argument in the public debate is also the creation of new markets for environmentally benign products processes and services in other countries and the generation as a result of export opportunities for the pioneering country lead markets research on lead markets has not however focused on environmental innovations to date we therefore extend the lead market model to environmental innovations and take particular account of the peculiarities of such innovations in particular the public good character of environmental benefits and the role of regulations this approach is applied to two case studies wind energy and fuel efficient passenger cars in both cases the innovation was initially adopted in one country other countries subsequently adopted the same innovation design favored by the lead market which in turn developed into a large exporter in the wind generation and car industries respectively we discuss the regulations employed and the reasons for the international success of the innovations induced by them our findings demonstrate that when supported by global demand or regulatory trends strict regulation results in the creation of lead markets finally we provide recommendations on how our model could be used for further research and in the development of a coordinated environmental and innovation policy

incomplete written contracts undescribable states of nature this paper extends the classic two armed bandit problem to a many agent setting in which n players each face the same experimentation problem the difference with the single agent problem is that agents can now learn from the experiments of others thus experiementation produces a public good and a free rider problem in experimentation naturally arises more interestingly future experimentation by others encourages current individual experimentation the paper provides an analysis of the set of markov equilibria in terms of the free rider effect and the encouragement effect

auditor gender and stock price crash risk evidence from china stock price crash risk is attributed to agency problems and information asymmetry auditors generally play a more important governance function in countries with weak legal institutions previous s

technology transfer under asymmetric information licensing contracts for newly patented innovations are observed to vary along several dimensions including the form and size of the payment to the inventor fixedfee versus some output based royalty the degree of exclusivity and the division of rents in this article we show that theform of the contract can be explained by two problems in technology exchange the superiority of a licensor s precontractual information about the economic value of the innovation and thefact that sharing this information with the licensee mayfacilitate imitation we show that a licensor signals her technology type with an output based payment or royalty and may leave some of the rents with the licensee conditions under which exclusive license contracts linear and nonlinear and nonexclusive linear contracts are used to transfer technology are identified

licensing information goods abstract a significant amount of research on patent licensing and the diffusion of knowledge is organized around static frameworks of analysis patent holders however may face a dynamic problem namely the intertemporal consistency problem of the durable goods monopolist that is induced by durability on the demand side licensing practices such as exclusive licensing contracts and most favored customer clauses allow patentees to solve or mitigate this dynamic consistency problem there are situations however where these practices are not possible either due to the nature of the patent the case of information goods or due to compulsory patenting laws we study the effects of the intertemporal consistency problem on patent licensing in these situations relative to the existing literature we obtain the following main results i all of the firms that remain in the industry will be using the innovation ii royalty licensing may be superior to fixed fee or auction licensing from the licensor s point of view iii social welfare and consumer surplus may be lower than when the patent holder can commit not to make additional sales iv even for non drastic innovations the price of the good that is produced may be lower than the competitive price corresponding to the initial situation before the innovation was discovered

auditor reputation the impact of critical reports issued by government inspectors in recent years u k department of trade investigations into the affairs of a specific company have sometimes been critical of the work done by its auditors and reporting accountants this article assesses the impact of this criticism on the auditor s reputation in particular it examines the stock price performance of the auditor s listed clients the results show a small wealth loss for the audit clients the article also examines the impact of the department of trade criticism on an audit firm s number of listed clients and its future audit fees compared to a control group the criticized auditors appear to suffer a small loss in market share based on number of listed clients and on audit fees the evidence suggests that criticized auditors incurred economic losses from the damage to their reputations this is consistent with models of reputation advanced in the industrial organization literature

accounting information in financial contracting the incomplete contract theory perspective this paper reviews theoretical and empirical work on financial contracting that is relevant to accounting researchers its primary objective is to discuss how the use of accounting information in contracts enhances contracting efficiency and to suggest avenues for future research we argue that incomplete contract theory broadens our understanding of both the role accounting information plays in contracting and the mechanisms through which efficiency gains are achieved by discussing its rich theoretical implications we expect incomplete contract theory to prove useful in motivating future research and in offering directions to advance our knowledge of how accounting information affects contract efficiency

fee versus royalty licensing in a cournot duopoly model abstract this paper finds that royalty licensing can be superior to fixed fee licensing for the patent holding firm when the cost reducing innovation is non drastic the reason for this result is that the patent holding firm enjoys a cost advantage over the licensee under royalty licensing while the two firms compete on equal footing under fixed fee licensing

planned obsolescence and the r d decision by investing in rd i e the r d choice that maximizes current profitability does not maximize overall profitability the result is that if output is sold rather than rented then in its r d decision the monopolist has an incentive to practice a type of planned obsolescence that lowers its own profitability

licensing a sequence of innovations it is common for a firm which receives a license for a technology also to obtain as part of the contract a license for future improvements on that technology we derive market structure reasons why such a provision might be used in a two period setting

how strong are weak patents economists usually conceive of patents as property rights that prevent others from practicing the patenting technology unless they first obtain a license from the patent holder even for ironclad patents i e for patents that are certain to be valid the existing literature has shown that the analysis of equilibrium licensing contracts is surprising subtle and complex 1 for example the analysis is quite different depending upon whether one firm s licensing contract is observable to the other firms likewise equilibrium outcomes are quite different if royalties must be linear than in the case where two part tariffs and other non linear royalties are permitted in that literature a downstream firm that refuses to sign a contract with the upstream supplier either exits the industry in the case that the upstream supplier controls an essential input or must rely on more costly inputs in the case of a non essential input in other words the downstream firm s threat point is to use some backstop technology in practice however patents are issued after a brief examination by the patent office to see if they meet the statutory requirements for novelty and non obviousness mounting evidence indicates that many weak patents i e patents unlikely to be found valid if challenged in court are issued by the u s patent and trademark office uspto 2 some observers view this with great alarm arguing that uspto is handing out undeserved monopolies others by contrast have suggested that these weak patents are of little concern because they will have little commercial impact because they will be licensed at commensurately low royalty rates or not enforced at all we study the commercial impact of weak patents more precisely we define a patent s strength as the probability that it will be found valid if challenged in court and we examine the relationship between a patent s strength and the royalties that it can command the distinctive

contractual flexibility rent seeking and renegotiation design an empirical analysis of information technology outsourcing contracts this paper examines renegotiation design in contracts for outsourced information technology it services whereas prior literature in information systems has highlighted the likelihood of ex post rent seeking engendered by renegotiation we build upon literature on incomplete contracts to posit that renegotiation can be pareto improving by incorporating contingencies revealed ex post research on contract renegotiation has been hampered by two sets of challenges the lack of appropriate data and empirical challenges in identification we circumvent this problem both by appropriate data collection and by employing an identification strategy to address alternate causal explanations we propose a measure pareto improving amendments to assess renegotiation outcomes that enhance the value from outsourcing by hazard equilibration and by incorporating learning using a unique sample of 141 it outsourcing contracts we examine the role of decision rights delineated ex ante in enabling pareto improving amendments and in resolving the trade off between adaptation and rent seeking we find that flexibility provisions termination for convenience rights and contractual rights whereby vendors are granted rights to reuse know how are associated with pareto improving amendments the results are robust to potential endogeneity of contractual provisions when parties have feasible foresight and to the possibility of adverse selection in the sample we also examine alternate explanations from the literature on contractual breach implications for practitioners and researchers are discussed this paper was accepted by sandra slaughter information systems

technology transfer with moral hazard abstract this paper develops an incomplete contract model of the licensing relationship that is susceptible to the moral hazard problem the optimal contractual form of licensing derived in the model generates predictions that seem to be consistent with actual practice for instance the introduction of inputs that are not contractible and costly explains the prevalence of royalty contracts in the licensing relationship moreover the model is able to relate the size of the royalty rate to the parameters that represent the environments under which the concerned parties operate finally the model can be naturally extended to analyze the choice of a technology holder between direct investment and licensing in an attempt to serve a foreign market

does auditor reputation matter the case of kpmg germany and comroad ag we study the stock and audit market effects associated with a widely publicized accounting scandal involving a public company comroad ag and a large reputable audit firm kpmg in a country germany that has long provided auditors with substantial protection from shareholder legal liability we use this event to study whether an auditor s reputation helps to ensure audit quality a rationale for which recent literature and events provide scant support given the absence of a strong insurance rationale for audit quality germany permits a relatively clean test of whether auditor reputation matters we find that kpmg s clients sustain negative abnormal returns of 3 at events pertaining to comroad and that these returns are more negative for companies that are likely to have higher demands for audit quality we also find an increase in the number of clients that drop kpmg in the year of the comroad scandal mostly smaller recently public companies that are similar to comroad overall our results provide support for the reputation rationale for audit quality

welfare reducing licensing abstract in this paper we characterize situations where licensing a cost reducing innovation to a rival firm using two part tariff contracts a fixed fee plus a linear per unit of output royalty reduces social welfare we show that it occurs if i the firms compete in prices ii the innovation is large enough but not drastic and iii the goods are close enough substitutes moreover we show that regardless of the type of competition first the optimal contract always includes a positive royalty and second even drastic innovations are licensed whenever the goods are not homogeneous

fees versus royalties and the private value of a patent we compare how much profit an owner of a patented cost reducing invention can realize by licensing it to an oligopolistic industry producing a homogeneous product by means of a fixed fee or a per unit royalty our analysis is conducted in terms of a noncooperative game involving n 1 players the inventor and the n firms in this game the inventor acts as a stackelberg leader and it has a unique subgame perfect equilibrium in pure strategies it is shown that licensing by means of a fixed fee is superior to licensing by means of a royalty for both the inventor and consumers only a drastic innovation is licensed to a single producer

on licensing policies in bertrand competition abstract three licensing policies the auction the fee and the royalty are studied in a bertrand type duopoly with differentiated goods the analysis is conducted in terms of a multistage noncooperative game involving an external patentee and two firms each producing a differentiated good in bertrand price competition a principal finding is that for a patentee the royalty may be superior to the other two policies journal of economic literature classification numbers 026 611 621

how to license intangible property we examine the optimal licensing strategy of a research lab selling to firms who are product market competitors we consider an independent lab as well as a research joint venture we show that 1 demands are interdependent and hence the standard price mechanism is not the profit maximizing licensing strategy 2 the seller s incentives to develop the innovation may be excessive 3 the seller s incentives to disseminate the innovation typically are too low 4 larger ventures are less likely to develop the innovation and more likely to restrict its dissemination in those cases where development occurs and 5 a downstream firm that is not a member of the research venture is worse off as a result of the innovation

potentials for prosperity without growth ecological sustainability social inclusion and the quality of life in 38 countries recent contributions to ecological economics and related social sciences indicate that issues such as climate change resource depletion and environmental degradation cannot be effectively addressed under conditions of continued economic growth this paper aims at empirically identifying structural potentials and policy challenges for prosperity at scales where economic development remains within ecological carrying capacities building on the growing literature that interprets prosperity beyond economic growth the paper presents a three dimensional concept to operationalise prosperity in terms of ecological sustainability social inclusion and the quality of life these dimensions are measured using data from sources such as the world bank the global footprint network and the oecd the results of cluster and correspondence analyses indicate the existence of five prosperity regimes and demonstrate that all aspects of prosperity including unsatisfactory ecological performance are linked to economic development however our findings also indicate that in order to achieve a decent minimum of prosperity moderate levels of the material living standard are sufficient further increases in the material living standard do not lead to significant additional prosperity instead they cause greater environmental harms the paper concludes by highlighting potentials for prosperity for each of the prosperity regimes and corresponding policy challenges

contracting for tacit knowledge the provision of technical services in technology licensing contracts abstract recent research on the economic payoff from new technology has emphasized the importance of tacit knowledge or know how this paper shows that arm s length contract can overcome the problems in contracting for know how by bundling complementary inputs with know how in a technology package and leveraging the superior enforceability of contracts over the latter in the empirical part of this paper the relationship between bundling and transfer of know how is analyzed using indian data the results imply that tied sales of inputs may increase the efficiency of contracts involving the transfer of know how a striking result in the context of the current north south debates on intellectual property rights is the packaging of patents with know how

general licensing schemes for a cost reducing innovation optimal combinations of upfront fees and royalties are considered for a cost reducing innovation in a cournot oligopoly for both outside and incumbent innovators it is shown that for any nondrastic innovation a the license is practically sold to all firms ensuring full diffusion of the innovation b consumers are better off firms are worse off and the social welfare is improved c the optimal licensing policy involves positive royalty for relatively significant innovations d compared to an incumbent firm an outsider invests more in r d and has higher incentive to innovate and e as a function of the magnitude of the innovation the industry size that provides the highest incentive to innovate is u shaped

on the duration of technology licensing abstract we model an innovator s choice of payment scheme and duration as a joint decision in a multi period licensing game with potential future innovations and some irreversibility of technology transfer we find that it may be optimal to license the innovation for less than the full length of the patent and that royalty contracts can be more profitable than fixed fee licensing even in the absence of information asymmetry and risk aversion moreover licensing contracts based on royalty have a longer duration than fixed fee licenses and are more likely to be used in industries where innovations are frequent and intellectual property protection is weak our paper also highlights an important link between the study of technology licensing and the theory of durable goods

driving factors for the success of the green innovation market a relationship system proposal this study aims to map out the relationships that make up green innovation initiatives in brazilian industry the sample comprised 100 managers at manufacturing companies most of them operating in the business of farm machinery and equipment 45 managers and steel structures 14 managers to develop this study medeiros et al j clean prod 65 76 86 2014 study mapping critical factors that drive the success of green product innovation and the paradigm of complexity was used as a reference study based on the results it was possible to identify that the operational dynamic of the factors and variables that affect market success do not happen in an isolated or fragmented way they occur systematically with different contingencies and structured basic and intermediate skills in order to meet the expectations of consumers laws and environmental legislation initially the technological expertise factor was noted as very important for sustaining green product innovation furthermore since proactive leaders are an important factor for successfully developing environmentally sustainable products it must be added to technological expertise as the foundation for developing green innovation after defining the basis for green product innovation the intermediary conditions necessary for using the available technology appropriately were mapped out in this sense variables such as elimination of cultural barriers capacity for critical reflective analysis and experimentation are also very important in addition some of the variables of the cross functional collaboration and market knowledge factors were a part of the structure that organizations need to transform potential into developing green products which is the basis for the third level of the model the fourth level of the model has the meeting consumer expectations and following law and legislation factors which make up the main goals for developing environmentally sustainable products according to a number of surveys that were conducted

patents vs trade secrets knowledge licensing and spillover we develop a model of two stage cumulative research and development rd yet the contracting parties choose the closed sale whenever the interim knowledge is more valuable and leakage is sufficiently high if the extent of leakage is lower more rus choose open sales generating a nonmonotonic relationship between the strength of intellectual property rights and aggregate r d expenditures and the overall likelihood of development by either du jel d23 o32 o34