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IP-for-IP or Cash-for-IP? R&D Competition and the Market for Technology

Herbst P & Jahn E (2017) IP-for-IP or Cash-for-IP? R&D Competition and the Market for Technology, Review of Industrial Organization, 51 (1), pp. 75-101.

We analyze how firms might benefit from trading restrictions in the market for technology. We show that restricting trade to reciprocal exchange (“IP-for-IP” barter instead of cash transactions), as in cross-licensing agreements, alters the allocation of R&D resources and reduces overinvestment in R&D. The tighter are the trading restrictions, the higher are the costs that are due to forgone gains from trade. Our analysis of the trade-offs involved shows that firms benefit from IP-for-IP restrictions, compared to both free trade and no trade environments, in industries where: (1) firms differ in their capabilities to commercialize IP; and (2) patent complementarities exist.

Intellectual property; R&D competition; IP-for-IP; Cross-licensing; Technology trade

AuthorsHerbst Patrick, Jahn Eric
Publication date08/2017
Publication date online17/09/2016
Date accepted by journal08/09/2016
ISSN 0889-938X

Review of Industrial Organization: Volume 51, Issue 1

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