Citation 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. https://doi.org/10.1007/s11151-016-9542-z
Abstract 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.