Licensing-in fosters rapid invention! the effect of the grant-back clause and technological unfamiliarity

Abstract

Drawing on contractual economics and innovation management, licensing-in is hypothesized to accelerate licensees' invention process. Studying a matched dataset of licensees and non-licensees, licensees are shown to be faster at inventing, but the effect is negated if the license includes a grant-back clause, shifting incentives from licensee to licensor. Also, the effect is significantly reduced if the licensee is unfamiliar with the licensed technology. The effect of the grant-back clause is offset if the licensee is unfamiliar with the licensed technology, suggesting that the licensee retains the incentives to invent under these circumstances. Copyright © 2012 John Wiley & Sons, Ltd.