The design of licensing contracts: Chemicals, pharmaceuticals, and electrical engineering in imperial Germany

Abstract

The article investigates a sample of 180 technology licensing contracts closed by German chemical, pharmaceutical, and electrical engineering companies between 1880 and 1913. The empirical results suggest that strategic behaviour is relevant for the design of licensing contracts, whereas inventor moral hazard and risk aversion of licensor or licensee seem to be less important. Moreover, the results suggest that uncertainty regarding the profitability of licensed technology influenced the design of licensing contracts. More specifically, profit-sharing agreements or producer milestones were often included in licensing contracts to solve this kind of problem.

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