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Domestic patenting systems and foreign licensing choices

Author

Listed:
  • Yingyi Tsai

    (National University of Kaohsiung)

  • Arijit Mukherjee

    (Nottingham University Business School
    CESifo
    INFER
    City University of Hong Kong)

Abstract

This paper examines a foreign technology holder’s licensing choices between royalty and fixed-fee scheme. We emphasize that foreign licensor chooses the quality of licensed technology when the licensee country does not implement perfect intellectual property protection for licensor’s technology. We study quality choice as the foreign licensor’s selection for a particular grade of technical skills. We show that fixed fee emerges as the equilibrium licensing scheme when both the transfer of his technology is relatively efficient and the licensee is sufficiently cost competitive in the domestic market, and that royalty licensing prevails otherwise. We further show it need not hold the general belief that welfare in the licensor country unambiguously rise with a stronger patenting system in the licensee country when, in particular, such patenting system in place is sufficiently lax.

Suggested Citation

  • Yingyi Tsai & Arijit Mukherjee, 2017. "Domestic patenting systems and foreign licensing choices," Journal of Economics, Springer, vol. 121(2), pages 173-191, June.
    • Handle: RePEc:kap:jeczfn:v:121:y:2017:i:2:d:10.1007_s00712-017-0523-y
    DOI: 10.1007/s00712-017-0523-y
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    References listed on IDEAS

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    More about this item

    Keywords

    Intellectual property protection; Licensing; Quality of the licensed technology; Welfare;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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