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Incentive for innovation and the optimal allocation of patents

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  • Kojun Hamada

Abstract

This article theoretically investigates how different ownership structures of patents affect ex ante and ex post incentives for innovation by applying a property rights approach. We explore a model in which two research laboratories invest in R&D to obtain an innovative patent, and after successfully obtaining the patent they determine an ownership structure for the patent. The two parties consider how the determined patent ownership would affect their noncontractible relation-specific investments for commercialisation. We demonstrate that joint ownership of a patent between two parties is optimal. More concretely, if a selfish (altruistic) relation-specific investment is more important than an altruistic (selfish) investment, a joint ownership with no (bilateral) veto is optimal to maximise the joint value. Moreover, when both parties do not commit themselves to joint ownership in advance, they have greater incentive to invest in R&D than committing, even if they understand that joint ownership is desirable ex post.

Suggested Citation

  • Kojun Hamada, 2017. "Incentive for innovation and the optimal allocation of patents," Australian Journal of Management, Australian School of Business, vol. 42(4), pages 692-707, November.
    • Handle: RePEc:sae:ausman:v:42:y:2017:i:4:p:692-707
    DOI: 10.1177/0312896216686152
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    References listed on IDEAS

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    Cited by:

    1. Schmitz, Patrick W., 2019. "Incomplete contracts, limited liability, and the optimality of joint ownership," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
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    3. Eva I. Hoppe & Patrick W. Schmitz, 2021. "How (Not) to Foster Innovations in Public Infrastructure Projects," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 238-266, January.
    4. Martina K Linnenluecke & Mauricio Marrone & Abhay K Singh, 2020. "Conducting systematic literature reviews and bibliometric analyses," Australian Journal of Management, Australian School of Business, vol. 45(2), pages 175-194, May.

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    More about this item

    Keywords

    Innovation; joint ownership; patents; property rights approach; R&D investment;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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