Managing Licensing in a Market for Technology

Ashish Arora, Thomas Rønde, Andrea Fosfuri

    Research output: Working paperResearch


    Over the last decade, companies have paid greater attention to the management of their intellectual assets. We build a model that helps understand how licensing activity should be organized within large corporations. More specifically, we compare decentralization—where the business unit using the technology makes licensing decisions—to centralized licensing. The business unit has superior information about licensing opportunities but may not have the appropriate incentives because its rewards depend upon product market performance. If licensing is decentralized, the business unit forgoes valuable licensing opportunities since the rewards for licensing are (optimally) weaker than those for product market profits. This distortion is stronger when production-based incentives are more powerful, making centralization more attractive. Growth of technology markets favors centralization and drives higher licensing rates. Our model conforms to the existing evidence that reports heterogeneity across firms in both licensing propensity and organization of licensing.
    Original languageEnglish
    Place of PublicationCambridge, MA
    PublisherNational Bureau of Economic Research (NBER)
    Number of pages29
    Publication statusPublished - 2012
    SeriesNational Bureau of Economic Research. Working Paper Series
    SeriesCentre for Economic Policy Research. Discussion Papers

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