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Licensing, entry, and privatization

Author

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  • Wang, Leonard F.S.
  • Zeng, Chenhang

Abstract

This paper examines how technology licensing by a private innovator affects privatization with ex-ante cost asymmetry. In a mixed duopoly, we find that licensing to the public firm reduces the incentive for privatization compared to the situation without licensing. This result is robust in consideration of either a domestic or a foreign entry of a private firm. However, licensing to the entrant private firm increases the incentive for privatization. Furthermore, we show that the effects of entry on privatization critically depend on whether the new entrant is a domestic or foreign one. The entry of a domestic private firm facilitates privatization while that of a foreign private firm hinders privatization.

Suggested Citation

  • Wang, Leonard F.S. & Zeng, Chenhang, 2019. "Licensing, entry, and privatization," International Review of Economics & Finance, Elsevier, vol. 62(C), pages 230-239.
    • Handle: RePEc:eee:reveco:v:62:y:2019:i:c:p:230-239
    DOI: 10.1016/j.iref.2019.04.003
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    Citations

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    Cited by:

    1. Madhuri H.Shastry & Uday Bhanu Sinha, 2023. "Privatization and Licensing under Public Budget Constraint," Working papers 343, Centre for Development Economics, Delhi School of Economics.
    2. Leonard F. S. Wang & Arijit Mukherjee & Chenhang Zeng, 2020. "Does technology licensing matter for privatization?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1462-1480, September.
    3. Cho, Sumi & Kim, Doori & Lee, Sang-Ho, 2021. "Free licensing strategy and ex post privatization in a mixed oligopoly," MPRA Paper 106126, University Library of Munich, Germany.
    4. Liu, Yi & Tan, Yu & Fang, Yu, 2019. "Innovation spillover, licensing, and ex-post privatization in international duopoly," MPRA Paper 95467, University Library of Munich, Germany.
    5. Lien, Wan-Chien & Chen, Jianhong & Sohl, Jeffrey, 2022. "Do I have a big ego? Angel investors' narcissism and investment behaviors," Journal of Business Venturing, Elsevier, vol. 37(5).
    6. Yi Liu & Leonard F.S. Wang & Chenhang Zeng, 2023. "Upstream privatization and downstream licensing," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(1), pages 148-165, March.
    7. Madhuri H. Shastry & Uday Bhanu Sinha, 2024. "Privatization and Licensing Under Public Budget Constraint," Journal of Industry, Competition and Trade, Springer, vol. 24(1), pages 1-22, December.
    8. Hongkun Ma & X. Henry Wang & Chenhang Zeng, 2021. "Location choice and costly product differentiation in a mixed duopoly," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 66(1), pages 137-159, February.

    More about this item

    Keywords

    Technology licensing; Entry; Privatization; Cournot;
    All these keywords.

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets

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