Does licensing promote innovation?. Issue 2 (17th February 2020)

• Record Type: Journal Article
• Authors: Colombo, Stefano
• Is Part Of: Economics of innovation and new technology. Volume 29:Issue 2(2020)
• Page Start: 206
• Page End: 221
• Publication Date: 2020-02-17
• Subjects: Patent licensing -- innovation; D45; Technological innovations -- Economic aspects -- Periodicals; 338.06405
• DOI: 10.1080/10438599.2019.1601373
• Languages: English
• ISSNs: 1043-8599

Abstract

ABSTRACT: We analyse the impact of licensing on the equilibrium amount of cost-reducing innovation under several licensing mechanisms in the case of a duopoly model with heterogeneous firms. Under a wide class of licensing mechanisms, we find that as product substitutability increases, the possibility of higher innovation under licensing compared to no licensing decreases. Therefore, firms' heterogeneity is crucial to assess whether licensing incentivizes or not R&D cost-reducing investments.