Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Licensing and Innovation with Imperfect Contract Enforcement.
() and Eirik Gaard Kristiansen
Abstract: Licensing promotes technology transfer and innovation, but
enforcement of licensing contracts is often imperfect. We explore the
implications of weak enforcement of contractual commitments on the
licensing conduct of firms and market performance. An upstream firm
develops a technology that it can license to downstream firms using a fixed
fee and a per-unit royalty. Strictly positive per-unit royalties maximize
the licensorís profit if competition among licensees limits joint profits.
Although imperfect contract enforcement lowers the profits of the upstream
firm, weak enforcement lowers prices, increases downstream innovation, and
in some circumstances can increase total economic welfare.
Keywords: Licensing; competition; innovation; imperfect contract enforcement.; (follow links to similar papers)
JEL-Codes: D43; K42; L13; L14; (follow links to similar papers)
26 pages, March 26, 2015
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