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Knowledge disclosure, patents and optimal organization of research and development

Bhattacharya, Sudipto and Guriev, Sergei (2004) Knowledge disclosure, patents and optimal organization of research and development. TE, 478. Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London, UK.

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Abstract

We develop a model of two-stage cumulative research and development (R&D), in which one Research Unit (RU) with an innovative idea bargains to license her nonverifiable interim knowledge exclusively to one of two competing Development Units (DUs) via one of two alternative modes: an Open sale after patenting this interim knowledge, or a Closed sale in which precluding further disclosure to a competing DU requires the RU to hold a stake in the licensed DU’s post-invention revenues. Both models lead to partial leakage of RU’s knowledge from it’s description, to the licensed DU alone in a closed sale, and to both DUs in an open sale. We find that higher levels of interim knowledge are more likely to be licensed via closed sales. If the extent of leakage is lower, more RUs choose open sales, generating a non-monotonic relationship between the strength of Intellectual Property Rights (IPR) and aggregate R&D expenditures. We also develop a rationale for the ex ante acquisition of control rights over the RU by a DU, rooted in the RU’s incentives to create knowledge under alternative modes of sale thereof, and her wealth constraint in ex interim bargaining.

Item Type: Monograph (Discussion Paper)
Official URL: http://sticerd.lse.ac.uk
Additional Information: © 2004 the authors
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O34 - Intellectual Property Rights: National and International Issues
D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O32 - Management of Technological Innovation and R&D
Sets: Departments > Accounting and Finance
Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 478
Date Deposited: 11 Jul 2008 13:21
URL: http://eprints.lse.ac.uk/19315/

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