Deals not done: Sources of failure in the market for ideas

Ajay K. Agrawal · Iain Cockburn · Laurina Zhang

49 citations0/0 files storedStrategic Management Journal

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Intellectual Property and Patents Intellectual Property Law Innovation and Knowledge Management

Abstract

Using novel survey data on technology licensing, we report the first empirical evidence linking the three main sources of failure emphasized in the market design literature (lack of market thickness, congestion, lack of market safety) to deal outcomes. We disaggregate the licensing process into three stages and find that, although lack of market thickness and deal failure are correlated in the first stage, they are not in the latter stages, underscoring the bilateral monopoly conditions under which negotiations over intellectual property often occur. In contrast, market safety is only salient in the final stage. Several commonly referenced bargaining frictions (congestion) are salient, particularly in the second stage. Also, universities and firms differ in the stage during which they are most likely to experience deal failure . Copyright © 2014 John Wiley & Sons, Ltd.

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References

1962Economic Welfare and the Allocation of Resources for Invention 1986Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy 1996Strategic alliances and interfirm knowledge transfer 2001The Patent Paradox Revisited: An Empirical Study of Patenting in the U.S. Semiconductor Industry, 1979-1995 2004Exploration and exploitation alliances in biotechnology: a system of new product development 2000Do firms learn to create value? The case of alliances 2001Proofs and Prototypes for Sale: The Licensing of University Inventions 2000Learning from competing partners: outcomes and durations of scale and link alliances in Europe, North America and Asia

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