policy watch infrastructure investment and economic growth in the late 1980s david aschauer 1989 triggered a long overdue dialogue among economists and political leaders when he published a study arguing that much of the decline in u s productivity that occurred in the 1970s was precipitated by declining rates of public capital investment my own work confirmed these results munnell 1990a spending advocates seized on these findings as support for increased public investment the enthusiasm among policymakers for the early aschauer results was matched if not surpassed by skepticism on the part of many economists critics of these studies charged that the methodology was flawed that the direction of causation between public investment and output growth is unclear and that even if the historical empirical relationships were estimated correctly they provide no clear indications for current policy who s right what do we know and not know about the link between public infrastructure and productivity and what are the implications of these results for policy

what is a relationship worth repeated exchange and the development and deployment of relational capital organization scholars have highlighted the value of relationships in fostering effective exchange suggesting that repeated exchange creates a relational asset with latent value derived from elevated social connections norms and simple expectations of exchange continuity yet the empirical evidence supporting such claims remains largely indirect as a consequence few studies have been able to directly examine how contextual factors shape the accumulation of this relational asset or define its value in application we directly measure the value of relationships between suppliers and a large buyer using the buyer s choices in internet enabled procurement auctions to estimate the degree to which stronger relationship histories with suppliers increase willingness to pay for high volume commodity like parts our setting also allows us to examine how this willingness to pay for relationships is shaped by the social context in which they develop and by the exchange context in which they are subsequently depl

overcoming institutional voids via arbitration extending the literature on institutional voids we introduce theory from law that highlights the ability of firms to choose the laws and enforcement mechanisms that govern their international joint ventures ijvs specifically firms may overcome institutional voids by borrowing institutions via binding international commercial arbitration bica rather than relying on host market institutions leveraging an institution based view we develop a theoretical framework to articulate the conditions under which ijv partners may choose bica as opposed to domestic courts to overcome institutional voids in host 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

determinants of inter firm technology licensing in the eu this article investigates the determinants of technology licensing focusing on how country specific characteristics affect technology holders incentives to sell their proprietary technologies through licensing alliances an empirical examination of licensing is done using a unique panel data set of licensing transactions involving companies in the eu the strength of intellectual property rights ipr protection the degree of economic freedom the level of country risk and the number of patent granted in the country are found to be important determinants of inter firm technology licensing in addition firms with prior independent experience as a licensor and public companies tend to license technology more

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

how smes exploit their intellectual property assets evidence from survey data this paper seeks to understand how motives to patent affect the use of the patent portfolio with a particular focus on motives aimed at the monetization of intellectual property the analysis relies on data from an international survey conducted by the european patent office there are three main results first small and medium sized enterprises smes exhibit a much stronger reliance on monetary patents than large companies and nearly half of the smes in the sample patent for monetary reasons second smes tend to use their patents more actively than large firms third smaller companies generally have a higher proportion of their portfolio that is licensed but the licensing rate is significantly higher in the usa an american sme is twice as likely as a european sme to have a high share of its portfolio that is actually licensed witnessing a fragmented market for technology in europe

field of use restrictions in licensing agreements a widely used clause in license contracts the field of use restriction four precludes licensees from operating outside of the technical field specified when a technology has several distinct applications four allow the licensor to divide up his rights and attribute them to the lowest cost producer in each field of use this can improve production efficiency with complex technologies however the boundaries of fields of use may be difficult to codify entailing a risk of licensees rights overlapping we explore how this affects the optimal license contract in a moral hazard framework where the licensor s effort determines the probability of overlap we show that depending on the contracting environment the license agreement may include output restrictions and non linear royalty schemes

strategizing by firms in the presence of markets for resources strategizing by firms from the resource based view is concerned with the process through which firms acquire a distinctive bundle of resources that is costly and time consuming for competitors to duplicate or imitate a central question facing any firm therefore is its strategy for accumulating the resources that underpin its production activities in this article the process of resource accumulation is discussed as one involving potentially both internal resource development and external resource acquisition from the perspective of the strategic issues involved in making a choice between these options emerging markets for technologies and know how through licensing and other forms of resource exchange have opened up new avenues through which firms may jostle for advantage the article is concerned with three major aspects of this process illustrating the discussion with cases from biotechnology and pharmaceuticals first the strategizing by firms around the internal development vs external sourcing issue is discussed as informed by the practices of leading firms and how these lend greater variety of strategic options for firms second the potential competitive advantages as well as disadvantages to be secured by firms through the process of external sourcing as compared with the well known potential advantages accruing to incumbents through internal development such as time compression diseconomies and causal ambiguity and third the criteria to be used by firms to strategically evaluate resources individually as contrasted with the strategic evaluation of the resource bundle or totality these criteria it is argued turn on the issues of marginal value contribution resource complementarities and synergies resource variety and transferability involving intellectual property issues successful firms it is argued expand their options through blending internal resource accumulation with external resource leverage thereby deepening their distinctive dynamic capabilities this approach extends the framework of the rbv enabling it to encompass resource driven schumpeterian competition and such aspects of industrial dynamics as specialization modularization and imitative challenge copyright 2003 oxford university press

tax competition when governments lack commitment excess capacity as a countervailing threat consider a multinational firm that can produce for the world market from two countries in each country the firm has to make a costly ex ante investment in capacity after which each government chooses a tax rate and then the firm determines output levels if there were only one country there would be the standard timeinconsistency problem the government would set a confiscatory tax ex post the firm would realize this ex ante and no investment would be made the interesting point of this paper is that the situation is very different when there are two countries the firm invests in both countries so as to gain leverage ex post if the firm holds more capacity than is needed to meet world demand then this induces tax competition for capacity utilization among governments ex post because the firm can threaten to serve the market at least partially from a plant in a different country competition leads to low enough tax rates to justify the initial investment in excess capacity when capacity costs are sufficiently low when capacity costs are too high the firm will not invest at all as the standard timeinconsistency problem suggests thus the paper generates and combines tax competition and lack of government commitment within a single framework the above logic provides also a novel argument for becoming a multinational firm there is some evidence in support of the strategic use of excess capacity for example general motors gm announced it will build almost identical plants in several risky countries which allows gm to shift production easily at the same time the newly established capacity will probably exceed gm s sales another application is the problem of how multinationals export oil from the caspian sea the caspian sea is surrounded by politically unstable countries multinationals started to build and lobby for multiple pipelines through several countries in order to keep transit fees low these and other applications are discussed in more detail in section v the paper sheds new light on the relationship between multinational firms and host governments on the one hand a multinational firm can be viewed as the powerful agent in the relationship because the firm decides in which country to invest eager governments often offer substantial tax benefits in order to attract investment this view is underlying the literature on tax competition see for example john d wilson 1986 dan a black and william h hoyt 1989 ian king et al 1993 on the other hand and in a separate literature multinational firms are portrayed as the potential victims of host governments who may renege on tax promises after the firm has made a sunk investment and has become partially immobile see for example eric w bond and larry samuelson 1989 chris doyle and sweder van wijnbergen 1994 jonathan thomas and tim worrall 1994 hence the host government is the powerful agent and this may lead to underinvestment if anticipated by the firm 2 while both views capture elements of truth it is unsatisfactory that our understanding of the relationship seems to department of economics university of colorado boulder co 80309 e mail janeba colorado edu this research was undertaken while i was at indiana university in bloomington i am grateful to mike baye susanne janeba dave schmidt greg shaffer jay wilson and two anonymous referees as well as participants at the stanford institute for theoretical economics 1998 and workshop participants at the universities of bonn colorado indiana michigan munich pennsylvania state and toronto for very helpful comments the usual disclaimer applies l in a different context patrick j kehoe 1989 considers also tax competition after a private sector decision is made in his model however atomistic individuals decide on savings and cannot influence the degree of tax competition 2 it should be noted that in the second literature strand tax holidays are sometimes derived endogenously in an infinite horizon game tax holidays help overcome lack of commitment see for instance doyle and van wijnbergen 1994

an introduction to the law and economics of intellectual property although economists have written on topics of intellectual property for a long time the impact of economics on public policy in this area has been slight especially as compared to the influence of professional writings in areas such as antitrust and taxation we believe that too few of the profession s resources have been devoted to these issues and that of those resources that have been employed too few have been devoted to empirical analyses we hope that this introductory essay and the three papers that follow will stimulate interest in this subject this introductory essay first describes some of the basic economic tradeoffs involved in intellectual property law and then describes the framework of the law in the six areas described above patent copyright semiconductor protection trademark trade secret and misappropriation it is intended both to provide thumbnail descriptions of the various intellectual property regimes to economists working in this area and to indicate where additional economic research might be useful

a patent system for both diffusion and exclusion public policy analysis of optimal patent regimes is often framed as a tradeoff between static and dynamic efficiency in this analytical framework weak patent protection and strict antitrust policy are taken to be directed toward static concerns while protection of intellectual property through strong patent laws is taken as a reflection of broader social concerns for long run growth and technological progress this characterization has some truth but the magnitude of the conflict between static and dynamic efficiency can easily be exaggerated in this article i want to argue that weak patent protection need not be inimical to economic growth and conversely that strong patent protection need not be an enemy of diffusion appropriately structured patent law and antitrust rules can together ensure incentives for r d and also induce cooperation among firms in diffusing r d results through licensing and other means at the same time cooperation among firms at the r d stage can counterbalance weak patent protection by internalizing spillovers from ongoing r d programs and such cooperation may also produce additional spillovers from the existing knowledge

international technology licensing monopoly rents transaction costs and exclusive rights as firms increasingly use licensing to exploit knowledge based assets in global technology markets appropriate structuring of these agreements has become an important line of research inquiry one area that has received less attention is the nature of rights granted in inter firm licensing relationships although it is an important clause that has implications for profit generation from licensing of proprietary assets conceptualizing licensing rights in terms of number of licenses granted and exclusivity rights given to a licensee in a foreign market this paper examines the determinants of these rights based on monopoly rents and transaction costs associated with different types of licensing contracts hypotheses are empirically tested through two studies one based on large us manufacturing firms and the other on a cross national sample of medium sized firms actively involved in international technology licensing results from both studies show a greater propensity to use non exclusive multiple licensing when the licensed technology has greater potential to produce differentiated products or when there is greater threat of substitutive technologies entering the market on the other hand innovative technologies and a higher degree of asset specific investments required of the licensee for the technology are related to the use of single exclusive licensing agreements

competition and the efficiency of markets for technology the sale of r d projects through licensing facilitates the division of labor between research and development activities this vertical specialization can improve the overall eciency of the innovative process however these gains depend on the timing of the sale the buyer of an r d project should assume development at the stage at which he has an eciency advantage we show that in an environment where the seller is overcondent about the value of the project she may delay the sale to the more ecient rm in order to provide veriable information about its quality though this delay implies higher total development costs for the project we obtain a condition for the equilibrium timing of licensing and examine how factors such as the intensity of competition between potential buyers inuence it we show that a wide array of dierent explanations based on dierences in information beliefs or risk proles lead to the same qualitative results we present empirical evidence from pharmaceutical licensing contracts that is consistent with our theoretical predictions

public infrastructure investment output dynamics and balanced budget fiscal rules abstract we study the dynamic macroeconomic effects of public infrastructure investment under a balanced budget fiscal rule using an overlapping generations model of a small open economy the government finances public investment by employing distortionary labor taxes the balanced budget rule implies a negative short run output multiplier that exceeds in absolute terms the positive long run output multiplier larger public capital spillovers sharpen the intertemporal output tradeoff in contrast to conventional results regarding public investment shocks we obtain dampened cyclical responses for plausible parameter values the cyclical dynamics arise from the interaction between the labor tax rate the tax base and the intergenerational spillover effects we show that financing scenarios involving public debt creation can substantially reduce the short run output contraction and the transitional macroeconomic fluctuations induced by public investment

a structural model on the impact of prediscovery licensing and research joint ventures on innovation and product market efficiency abstract using a novel database on prediscovery licensing agreements one type of r d cooperation as well as detailed firm level and semiconductor market specific information we estimate the impact of prediscovery licensing agreements pdlas on innovation and product market efficiency our results show that pdlas reduce innovative activity in the semiconductor industry by 10 percent or 4089 patents throughout the 1989 1999 period on the contrary research joint ventures a different type of r d cooperation increase innovative activity based on a structural model we provide evidence that pdlas increase production costs and semiconductor prices by 1 percent which results in customers paying an additional 1 1 billion for semiconductors per year beyond the common concern that r d cooperations facilitate coordination activities in product markets via price fixing our study highlights that pdlas can be used as an instrument to coordinate r d activities which can reduce innovation activity and increase costs and prices

state infrastructure and productive performance recent research on productivity growth has focused on public infrastructure and its impact on economic growth and productivity the authors construct a model of firms technology and behavior taking advantage of the analytical framework provided in the cost function based applied production theory literature and apply it to state level data for u s manufacturing they find that infrastructure investment provides a significant return to manufacturing firms and augments productivity growth the net benefits of infrastructure investment may or may not be positive depending upon the social costs of infrastructure investment and the relative growth rates of output and infrastructure copyright 1996 by american economic association

filling potholes macroeconomic effects of maintenance versus new investments in public infrastructure abstract the maintenance of existing public infrastructure has often been neglected in favor of building new infrastructure in developing countries this paper develops a dynamic general equilibrium model that analyzes the reasons and effects of such neglect first the optimal level of maintenance is shown to depend on the size of new investments as a share of existing public infrastructure and on the productivity of infrastructure second the model is parameterized and solved numerically for a sample of latin american countries quantitative results show that reallocating funds from new infrastructure to maintenance can have positive effects on these countries gdp

the quality of innovation and the extent of the market abstract i present a comprehensive model of international trade in technology that considers both the demand for inventions and the supply of inventions on the demand side domestic and foreign firms make strategic technology adoption decisions on the supply side inventors compete to sell licenses for their technology to domestic and foreign firms countries benefit from international trade in technology because they obtain the best invention from a larger pool of inventions international trade in technology increases the extent of the market for inventions and thereby improves the quality of innovation technology trade lowers prices increases outputs and increases the volume of trade in differentiated products when traded products are not close substitutes international markets for technology generate gains from trade the results of the analysis are robust to the possibility of technology transfer either through expropriation or imitation protection of intellectual property rights preserves incentives for entry of inventors and improves the quality of innovation

contracting with qualified suppliers in an extension of the laffont tirole model a buyer fully qualifies a set of suppliers ex ante and awards production to the most efficient ex post the buyer s incomplete information about production costs biases ex ante market structure in favor of a greater number of qualified suppliers further extensions that allow product differentiation and learning by doing suggest explanations for split production awards and less than fully qualified suppliers it may be difficult to specify ex ante precisely how the assets will be employed in production grossman and hart 1986 once relationship specific assets are in place the characteristics of the transaction and the gains from trade will be determined by ex post contracting between the buyer and the seller a safeguard for the buyer is to contract with more than one potential supplier to invest in the relationship specific assets required for production then after production require ments become clear the buyer can structure a competition between these suppliers for the right to produce this article analyzes when a second sourcing policy is desirable and how the buyer should structure it asanuma s 1989 description of the two vendor policy of automobile manufac turers in japan provides a context for the analysis japanese automobile manufac turers contract out for various kinds of components for example headlamps brakes or steering columns the common practice is to purchase each component from a small and relatively stable group of qualified suppliers with the purposes of assuring supply and of creating competition moreover for a particular part for a particular model there is a tendency for an automobile manufacturer to purchase from a single supplier in the group for the life of the model my understanding from interviews and the trade press is that u s automobile manufacturers also sole source from a select group of qualified suppliers but with

a general tce model of international business institutions market failure and reciprocity in this study i propose a general transaction cost economics tce model of international business institutions in which cross border transactions can be conducted at multiple market levels e g output asset and equity and the buyer seller relationship can go both ways a sells to b and b sells to a this general model addresses two major gaps in the literature first although market failure is the driving force behind the rise of multinational enterprises mnes most researchers have focused on the failure of a single market without exploring the presence of substitute markets for cross border transactions second many previous studies have begun their analysis with a bilateral setup between an mne and an indigenous firm for example a licensing agreement but concluded with a unilateral decision made by the mne to evade the indigenous firm in the case of direct investment in bridging the two literature gaps i propose a general tce model to integrate all institutional modes available to firms for governing international business such as licensing outsourcing acquisitions and joint ventures built on a multi market framework my analysis reveals that the choice of the optimal international business institution is tantamount to the selection of the most efficient market to conduct cross border transactions drawing on a bilateral setup it explicitly recognizes the power of reciprocity in solving the problem of market failure this distinct approach points out promising directions for future researchers to advance international business studies particularly after my transaction level analysis has been expanded to also consider institutional contexts and firm capabilities

licensee technological potential and exclusive rights in international licensing a multilevel model granting of exclusive rights is an important consideration for firms using licensing as a mode of entry into foreign markets as exclusive contracts reduce licensors flexibility in a given market during the term of the agreement by granting exclusivity to a licensee with greater technological potential the exchange partners can increase the potential transactional value of the licensing agreement at the same time a licensee with strong technological potential will increase the threat of transactional hazards due to underinvestment and rent appropriation in this paper we develop and empirically test a model that evaluates the balancing of transactional value and transaction costs in exclusive licensing in particular we identify the conditions under which exclusive contracts are likely to be granted to foreign licensees with strong technological potential empirical results from a multilevel model based on 375 international licensing agreements of us firms in high technology industries during 1995 2008 show that licensees with a stronger technological potential are more likely to be granted exclusive rights in countries with strong intellectual property rights protection and in industries with a high rate of technological change but are less likely to be granted exclusive rights when there is a high degree of overlap between licensor and licensee products

a theory of buyer seller networks this paper introduces a new model of exchange networks rather than markets of buyers and sellers it begins with the empirically motivated premise that a buyer and seller must have a relationship a link to exchange goods networks buyers sellers and the pattern of links connecting them are common exchange environments this paper develops a methodology to study network structures and explains why agents may form networks in a model that captures characteristics of a variety of industries the paper shows that buyers and sellers acting strategically in their own self interests can form the network structures that maximize overall welfare

licensing in the theory of innovation this article analyzes licensing in a noncooperative r d game we ask two questions what are the incentives for licensing a production technology and what is the impact of licensing on the pattern of innovation and the consequent evolution of industry costs and market structure the gainsfrom trading information through licensing contracts are achieved through the replacement of inefficient production techniques the ex post incentive and the elimination of inefficient research expenditures the ex ante incentive in a duopoly the availability of licensing encourages research when the firms initial production technologies are close in costs and discourages research when initial costs are asymmetric

a dynamic model of open source vs proprietary r d abstract we propose a dynamic model in which firms compete to produce sequential and cumulative innovations and in which the more firms do research in one sector the more likely it is that one of them innovates firms choose research effort and whether to patent innovations or to use an open source license like the general public license we show that i patents generate a larger stationary reward but foreclose research within a sector and that ii open source generates a smaller stationary reward but allows everyone to use the technology and therefore by attracting firms to the sector it induces a faster pace of innovation we characterize all the equilibria of the model and show that in equilibrium an open source sector appears only after a proprietary sector we also find conditions under which the model has a unique equilibrium in which a proprietary and an open source sector coexist and compete in the short run but the open source sector dominates the industry in the long run we use our model to study whether patents are inefficient and to explain firms behavior in the software and the biomedical industry

designing a private industry government auctions with endogenous market structure abstract this paper considers government mechanisms for auctioning production rights in which both the winners and the market structure doupoly dual sourcing monopoly sole sourcing or government owned production are a function of the bids in designing the optimal mechanism the government considers the tradeoffs among consumer surplus producer surplus and revenue under incomplete information doupoly is implemented less frequently and government production more frequently than under complete information when bidders are symmetric the optimal mechanism can be implemented as a modified second price auction applications to privatization deregulation and defense procurement are discussed

public investment in infrastructure in a simple growth model abstract in this paper we examine the implications for capital accumulation when infrastructure enters as an external input into private production functions in our model infrastructure is nonexclusive but may exhibit varying degrees of nonrivalry revenues from uniform taxes on capital and labor income are used to finance public investment in infrastructure we show that the optimal tax rate is independent of the degree of nonrivalry when production exhibits constant returns to augmentable factors the equilibrium displays constant growth for most parameters the growth rate depends on the population size under decreasing returns the optimal trajectory exhibits monotonic convergence to a steady state level

intertemporal output and employment effects of public infrastructure capital evidence from 12 oecd economies this paper utilises an intertemporal optimisation framework to study the effects of public infrastructure capital on output supply and input demands in 12 oecd countries we find that in all 12 countries i public capital has positive long run effects on both output supply and input demands ii its mean short run rates of return are fairly low while the corresponding long run rates are much higher but declining over time these findings underscore important under investment gaps in infrastructure during the 1970s and 1980s these gaps however narrowed down significantly in a few cases completely by the early 1990s

inventor moral hazard in university licensing the role of contracts abstract we examine commonly observed forms of payment such as milestones royalties or consulting contracts as ways of engaging inventors in the development of licensed inventions our theoretical model shows that when milestones are feasible royalties are not optimal unless the licensing firm is risk averse the model also predicts the use of consulting contracts which improve the firm s ability to monitor inventor effort because these contracts increase the firm s expected profits the upfront fee that the university can charge is higher than otherwise these results therefore support the commonly observed university policy of allowing faculty to consult with licensing firms outside of their university contracts they also support firm policies of including milestones an empirical analysis based on a survey of 112 businesses that license in university inventions supports the complementarity of milestones and consulting suggested by the theory

deterrence by market sharing a strategic incentive for licensing the potential of an incumbent firm to retain its dominant position in a market is a focal point of the modem theory of industrial organization a recent literature examines this issue for markets in which challengers threaten an incumbent s position by engaging in research for a new technology richard gilbert and david newbery 1982 show that an incumbent firm with a firstmover advantage will preempt potential entrants by inventing a new technology slightly earlier than would its rivals in a stochastic r d therefore its introduction does not alter the decision to research when the pre innovation market is characterized by an incumbent and potential entrants stephen salant 1984 shows that licensing ex post to innovation can alter the research decision as anticipation of the returns from future licensing encourages research by the entrant as a counterpoint to the salant result i find that licensing ex ante to research may discourage further research by the entrant indeed this strategic incentive for licensing may be so strong as to persuade the incumbent as well as the entrant to terminate research activity to isolate this incentive for licensing from the one discussed by salant a simple model is constructed in which licensing of future technologies is not desirable anecdotal evidence suggests that the strategic incentive does lead innovators in some markets to license their technologies examples of this information sharing are prevalent in markets where technological change is rapid in the 1940 s standard oil of new jersey discovered a process for synthetic rubber it traded patent rights on this process for a synthetic oil production process discovered by farben a german rubber company in both the synthetic oil and synthetic rubber markets rival companies were department of economics scarsborough college university of toronto toronto ontario canada m5s lal i thank jon cohen and ron saunders for discussions that inspired this paper i am also grateful to yehuda kotowitz andy mclennan jennifer reinganum ralph winter myma wooders two anonymous referees and seminar participants at the university of toronto for helpful comments on earlier drafts

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

the dynamics of the transfer and renewal of patents this article explores new data on the transfer and renewal of u s patents and interprets this new evidence using a model of patent transfers and renewal we find that the proportion of transferred patents is large and differs across technology fields and especially type of patentees we also find that the probability of a patent being traded depends on a number of factors the age of the patent the number of citations received by a given age the patent generality and whether the patent has been previously traded or not these findings are consistent with the predictions of a model of patent transfers and renewals

licensing radical product innovations to speed up the diffusion abstract we present a differential game to study how companies can simultaneously license their innovations to other firms when launching a new product the licensee may cannibalize licensor s sales albeit this can be compensated by gains from royalties nonetheless patent royalties are generally so low that licensing is not an attractive strategy in this paper we consider the role of licensing to speed up the product diffusion word of mouth by licensee s customers and licensee s advertising indirectly push forward sales of the licensing company accelerating new product diffusion we find evidence that licensing can be a potentially profitable strategy however we also find that a weak intellectual property right ipr protection can easily diminish the financial attractiveness of licensing

the macroeconomic effects of distortionary taxation abstract prescott 1986 estimates that technology shocks account for 75 of the fluctuations in the postwar u s economy this paper reestimates the contribution of technological change for a standard business cycle model that includes a public sector and fiscal disturbances i find that a significant fraction of the variance of aggregate consumption investment output capital stock and hours of work can be explained by disturbances in labor and capital tax rates and government consumption i also use the model to quantify the welfare costs of capital and labor taxation for both the time series and welfare calculations maximum likelihood estimates of taste technology and policy parameters are used

licensing to enhance demand for new technologies this article presents a model in which licensing competitors expands demand for a new proprietary product and therefore may be a profit maximizing strategy for the licensor even when licensing increases industry cost in the model buyers care about price and quality sellers can contract on price but not on quality and a single supplier has monopoly power licensing induces quality competition and allows the supplying firms to make a quality commitment that would not be credible for a single firm as a result licensing increases industry demand and may generate an increase in industry revenue sufficient to offset any increase in industry cost some of the characteristics of the model are informed by observations in the semiconductor industry

cross licensing of competing patents as a facilitating device this paper hypothesizes that when their products are imperfect substitutes firms can promote collusion by cross licensing their competing patents cross licensing is shown to enhance the degree of collusion achieved in a repeated game by credibly introducing the threat of increased rivalry in the market for each firm s product the paper then examines the consistency of the theory developed with the available evidence antitrust implications of the practice of cross licensing of competing patents are discussed

retail contracting theory and practice we summarize a number of regularities that arise in the empirical literature on contractual relationships between manufacturers and their exclusive resellers we do this using studies of traditional and business format franchise relationships as well as studies of salesforce integration decisions some of the patterns that we uncover are consistent with a standard incentive cum insurance theory of organization while others are not we brie y review some theoretical extensions that seem promising in terms of reconciling seeming con icts between theory and practice i introduction manufacturers of retail products must decide whether to sell their products to consumers themselves vertical integration or to sell via independent retailers vertical separation when manufacturers do not perform the sales function internally but want exclusive retailers they usually choose some form of franchising 1 many theories attempt to explain the choice of retail organizational form moreover a considerable body of empirical evidence concerning this choice is accumulating we attempt to evaluate this econometric evidence and relate it to the theories to accomplish this task we assess studies of franchising arrangements as well as studies of sales force organization in industrial settings the paper is organized as follows in the next section we highlight a number of regularities that arise in the empirical literature on retail contracting in particular we nd that i risk is positively related to the use of high powered incentives vertical separation ii the importance of the agent s eiort in production is positively related to the use of high powered incentives

how do patents affect follow on innovation evidence from the human genome we investigate whether patents on human genes have affected follow on scientific research and product development using administrative data on successful and unsuccessful patent applications submitted to the us patent and trademark office we link the exact gene sequences claimed in each application with data measuring follow on scientific research and commercial investments using this data we document novel evidence of selection into patenting patented genes appear more valuable prior to being patented than non patented genes this evidence of selection motivates two quasi experimental approaches both of which suggest that on average gene patents have had no quantitatively important effect on follow on innovation

using cost observation to regulate firms the paper emphasizes the use of accounting data in regulatory or procurement contracts when the supplier 1 has superior information about the cost of the project and 2 invests in cost reduction the main result states that under risk neutrality the supplier announces an expected cost and is given an incentive contract linear in cost overruns this optimal contract moves toward a fixed price contract as the announced cost decreases an investment choice is then introduced and the use of a rate of return regulation is studied

deregulation and quality abstract this paper analyses within a static model the effect of quality concern on optimal market structure it focuses on cases where industry quality has public good like features and is not contractible it is shown that the introduction of competition raises a free rider problem which depresses quality the smaller producer free rides on its competitor investment which as a result underinvests to encourage the efficient producer to provide quality the regulator diminishes the market share of the opportunistic producer and chooses more often a monopoly however when quality is verifiable the introduction of competition entails no welfare loss whether the regulator observes total quality outcome or individual contributions

sustainable infrastructure investment with labor only production abstract the purpose of this paper is to consider a partial equilibrium model for a sustainable infrastructure investment in a labor production economy we consider an inter temporal stackelberg game in a capital primitive economy where all capital investments are made by a central agency a government the government is assumed to have a number of objectives including sustainability of the infrastructure investments while firms are assumed to be myopic maximizing only current profits and paying taxes as a function of their returns both open loop and closed loop feedback stackelberg strategies are considered based on the analysis of the investment game some conclusions are drawn regarding the propensity to invest as a function of sustainability constraints the taxation rates and employment levels we then show that investments can tend to a constant level and thus strategic government goals of sustainability and employment growth can be planned only if labor costs and the general price index are steady or characterized by a set of conditions ensuring the attainability of the steady state investment

trust and the market for technology abstract conditional on the decision to enter the market for immature technology we test for the effects that trust proxied by the context in which the negotiating parties first met has on the likelihood that these negotiations are successful using survey responses from 860 university firm and firm firm technology transactions we find that trust matters parties with high levels of trust i e know each other from a previous business are between 6 and 23 per cent more likely to conclude a transaction compared with those with low levels of trust i e cold callers we also find that patents can effectively substitute for a lack of trust and that trust is more important in upstream stages basic or applied science

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

the structure of payments as a way to alleviate contractual hazards in international technology licensing this article proposes an empirical model in which the option of choosing between royalties fixed payments or a combination of the two is made to mitigate contractual hazards in licensing contracts we examine licensing contracts between spanish and foreign firms during the 1960s and early 1970s using a new data source of 925 contracts the link between patenting and licensing is also analyzed the work provides evidence to support the hypothesis that the moral hazard problem truly influences the type of payment established in arm s length contracts when there is an important technological gap between unaffiliated firms this study also shows that the payment chosen depends on the size of the licensee firm copyright 2009 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

is public expenditure productive abstract this paper considers the relationship between aggregate productivity and stock and flow government spending variables the empirical results indicate that i the nonmilitary public capital stock is dramatically more important in determining productivity than is either the flow of nonmilitary or military spending ii military capital bears little relation to productivity and iii a core infrastructure of streets highways airports mass transit sewers water systems etc has most explanatory power for productivity the paper also suggests an important role for the net public capital stock in the productivity slowdown of the last fifteen years

market design with correlated valuations the effects of information on market design are explored in a simple setting where firms have private information about their correlated fixed costs and the government aims to maximize its expected revenue conditional on achieving efficient allocations government revenues are higher when the costs are less correlated or are more of a private value the reduced correlation increases the firms information rents but a change in the information structure also changes the expected market structures with positive effects on government revenues if the government faces the no deficit constraint there are situations where efficient allocations are achieved under asymmetric information but not under symmetric information

public infrastructure and the productive performance of canadian manufacturing industries this article examines the effects of public infrastructure on the productive performance of 12 two digit canadian manufacturing industries a flexible cost function incorporating public capital infrastructure is estimated for each industry separately using annual time series data for 1961 1995 the effects of public infrastructure on productivity are measured in terms of both cost saving dual and output augmenting primal measures we also investigate how public capital influences the input demand and cost structure in each industry and calculate the rate of return to public capital the empirical results provide strong evidence of the important role public infrastructure plays in the productivity of manufacturing industries the public capital serves as a substitute for both private capital and labor in most industries the rates of return to public capital are significant and vary over the years

regulation competition and liberalization in many countries throughout the world regulators are struggling to determine whether and how to introduce competition into regulated industries this essay examines the complexities involved in the liberalization process while stressing the importance of case specific analyses this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies

shirking sharing risk and shelving the role of university license contracts 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

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

in house competition organizational slack and the business cycle multiplant firms pit their facilities against each other for production assignments the present paper studies the consequences of this practice in a model where production is limited by capacity constraints and asymmetric information allows facilities to accumulate slack it shows the amount of slack per unit of output to be pro cyclical indeed as capacity constraints become more acute in economic booms the power of in house competition for quota assignments is reduced and slack per unit of output increases while the opposite is true in downturns moreover in downturns firms may use higher cost facilities even when lower cost plants are not running at capacity since this boosts x efficiency in low cost plants

how broad should the scope of patent protection be i explore the trade off between a patent s length that is its lifetime and its width that is its scope of coverage a wider patent generally reduces the distortion of consumers choices between the patented brand of the product and unpatented lower priced varieties sold by competitors but also permits higher prices which increase relative to profits the deadweight losses from consumers switching consumption out of the product class i show under what conditions infinitely lived but very narrowly focused patents are the socially efficient way to reward innovation and under what conditions very short lived but very broad patents are optimal

fiscal policy in general equilibrium this paper studies four classic fiscal policy experiments within a quantitatively restricted neoclassical model the authors main findings are as follows 1 permanent changes in government purchases can lead to short run and long run output multipliers that exceed one 2 permanent changes in government purchases induce larger effects than temporary changes 3 the financing decision is quantitatively more important than the resource cost of changes in government purchases and 4 public investment has dramatic effects on private output and investment these findings stem from important dynamic interactions of capital and labor absent in earlier equilibrium analyses of fiscal policy copyright 1993 by american economic association

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

productiveness and welfare implications of public infrastructure a dynamic two sector general equilibrium analysis abstract this paper develops a dynamic general equilibrium model that provides an internally consistent micro foundations framework where various effects of infrastructure policy changes can be studied devoting additional resources to infrastructure investment can payoff in terms of sizable increases in gdp and private investment in addition to this the model also makes predictions concerning changes in the welfare of agents resulting from additional infrastructure investment specific policy recommendations that attain highest welfare gains are computed the recommendation is that on average an additional 4 of gdp per year should be devoted to public investment in the latin american countries in the sample

novelty and disclosure in patent law the stringency of the novelty requirement in patent law affects the pace of innovation because it affects the amount of technical information that is disclosed among firms it also affects ex ante profitability of research we compare weak and strong novelty requirements from the standpoint of social efficiency we ask how our answer depends on the rule that determines which firm gets a patent when two firms have patents pending on the same technology the possible rules are first to invent which applies in the u s and first to file which applies everywhere else

the value of u s patents by owner and patent characteristics abstract this paper uses renewal data to estimate the value of u s patents controlling for patent and owner characteristics estimates of u s patent value are substantially larger than estimates for european patents however the ratio of u s patent value to r d for firms is only about 3 contrary to a common assertion patents issued to small patentees are much less valuable than those issued to large corporations litigated patents are more valuable as are highly cited patents however patent citations explain little variance in value suggesting limits to their use as a measure of patent quality

licensing duration in foreign markets a real options perspective licensing can be considered an initial trial of a foreign market before a firm fully commits to it through other investment modes the length of trial has great importance because licensing duration represents part of the licensing agreement when it is too short the firm may not acquire the necessary experience and knowledge of the foreign market but if it is too long the firm misses optimal expansion timing arguing that licensing can be considered as a european style real option with a fixed holding period we develop and test a model of the determinants of licensing duration in foreign markets empirical results based on a sample of firms in various countries show that uncertainty and threat of competitive pre emption in the foreign market are related to shorter duration of the technology licensing agreements we also find that irreversibility of the impending investment moderates the relationships between uncertainty and duration specifically market and technology uncertainties in the foreign market induce shorter contracts under low levels of irreversibility

the welfare cost of factor taxation in a perfect foresight model this paper examines the marginal efficiency cost of various factor taxes in a dynamic general equilibrium model the au thor solves for the excess burden of anticipated and unanticipated t emporary and permanent tax policies using a range of estimates for taste and technology parameters he finds excess burdens larger than those indicated by previous studies that use static models these exc ess burdens are sensitive to parameter values and timing however th e rankings of alternative tax policies turn out to be insensitive to structural parameter values copyright 1987 by university of chicago press

do patents work thickets trolls and antibiotic resistance this paper connects ideas from recent literature on the economics of intellectual property ip to address the question did the strengthening and broadening of ip rights from important patent policy changes in the us promote greater innovation the analysis rests on the theory of cumulative innovation which shows that if ip rights on a pioneer invention extend to follow on research and impediments to contracting exist then strengthening patents can actually reduce overall innovation recent empirical studies are consistent with the theory patents can significantly deter follow on research in complex technology areas where contracting is difficult computers electronics telecommunications but not in drugs chemicals and human genes i outline remedies from court decisions and antitrust policy for addressing inefficiencies from patent trolling patent thickets and the anti commons of fragmented ownership i then apply the analysis to the antibiotics market drawing on recent research to examine how patent and competition policies can be used to improve incentives for drug development in the battle against antibiotic resistance the literature provides persuasive evidence that the policy changes overreached in broadening and strengthening ip rights and reveals important patent reforms for improving the effectiveness of patent systems in the us and canada

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

split awards procurement and innovation in many procurement settings it is possible for a buyer to split a production award between suppliers in this article we develop a model of split award procurement auctions in which the split choice is endogenous we characterize the set of equilibrium bids and allocations for optimizing agents in an environment in which suppliers are fully informed about each other s costs split award equilibria simultaneously exhibit strong collusive features and cost efficiency properties despite the former property of the equilibria upstream investment considerations may lead a buyer to prefer a split award auction format to a winner take all auction format

patent protection and the industrial composition of multinational activity evidence from u s multinational firms using data on u s firms technology licensing to local agents in developing countries this paper examines the impact of patent protection on internal and arms length technology transfer the effects of protection vary across products according to their complexity consistent with theories of internalization we find that patent reforms enable local firms to attract more arms length technology transfer especially of simple products which are relatively easy to imitate affiliated licensing also rises among simple products but falls among complex products the results withstand several robustness checks including controlling for endogeneity by using colonial origin as an instrument and are equally strong whether patent protection is measured by its intensity or by the timing of reforms the results have significance for patent policy in the developing world where access to knowledge is critical through arms length technology contracts proprietary knowledge diffuses beyond firm boundaries enabling local agents to access not only the protected technology but also know how

intellectual property protection and the industrial composition of multinational activity in a north south model with endogenous fdi we examine the impact of southern ipr protection on the mode and industrial composition of international technology transfer a novel feature of the model is that due to technological reasons industries differ with respect to their susceptibility to imitation in equilibrium licensing occurs in industries where the risk of imitation is low and fdi where it is of intermediate magnitude stronger iprs in the south i alter the industrial composition of multinational activity towards licensing at the expense of fdi ii reduce local imitation and iii increase licensing and to a lesser extent fdi

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

incomplete information and optimal market structure public purchases from private providers abstract market structure is endogenized in a normative model of public procurement featuring a social cost of profit product variety economies of scale and incomplete information about cost depending on parameters either sole sourcing or dual sourcing might be optimal however if the social cost of profit is positive but not too large incomplete information biases optimal market structure in favor of sole sourcing on the other hand this bias in favor of sole sourcing may be reversed if the social cost of profit is large an application to the publicly financed treatment for drug abuse motivates the analysis

formation of buyer seller trade networks in a quality differentiated product market we examine the formation of buyer seller links when exchange can take place only if such a link exists sellers produce products of different qualities and multiple sellers can form a sellers association to pool their customers setting uniform prices buyers form trade links with individual sellers or sellers associations we show which buyer seller links will form and find the set of links that are stable and show how these links influence prices we also show that a trade network mismatch may occur where a high quality good remains unsold even without an economy wide excess supply of goods jel classification d40 d51 d82