Publication Type

Journal Article

Version

acceptedVersion

Publication Date

2-2016

Abstract

Patent intermediaries have gained importance as non-practicing entities in the innovation domain, buying innovations from an external provider and then licensing them to practicing firms. In this study, we analyze the competition between two identical incumbent firms and a patent intermediary for the acquisition and licensing of a cost-reducing innovation developed by an external innovator. We show that the outcome of the IP acquisition and licensing game critically depends on the degree of the cost-reducing innovation. Patent intermediaries win IP rights in patent markets if the innovation is incremental. They also win the IP rights when the innovation is moderate or radical, providing they have significant efficiency advantages over incumbent firms and the uncertainty about the degree of innovation is low. We also show that patent intermediaries serve to make markets more efficient. When the innovation is incremental or moderate, they help ensure a lower cost of production and a lower price for customers, and when the innovation is radical, they help increase the profits of the incumbent firms.

Keywords

patent intermediary, cost-reducing innovation, degree of innovation, Cournot competition, innovation management

Discipline

Operations and Supply Chain Management | Technology and Innovation

Research Areas

Operations Management

Publication

Production and Operations Management

Volume

25

Issue

2

First Page

173

Last Page

191

ISSN

1059-1478

Identifier

10.1111/poms.12391

Publisher

Wiley

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1111/poms.12391

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