PhD Seminar

PhD Seminar by
Maria Isabella Leone, University of Bologna

Visiting PhD student at INO

"How well do you know your potential licensee?"

Technological diversification, learning and option value of licenses: the licensee's perspective

Abstract:

The recent shift of firms to more open models of innovation based on collaboration and external sourcing of knowledge suggest how strongly firms rely on knowledge and expertises from a wide range of external sources in attaining competitive advantage. There is evidence suggesting that the use of licensing as an instrument for knowledge-transfer is increasing, mainly in high-tech industry. Needless to say, there are still substantial obstacles to license agreements that hinder the match between licensees and licensors. Among others, there are
the lack of reliable methods for valuing patents,
the shortage of information about possible licensees and
the lack of expertise in setting contract terms that may represent an essential part of the agreement (e.g. to deal with the possibility that the licensee can even learn from the licensed technology and thus crowds the licensor out in the next round of innovation). However, so far, academic works in dealing with the analysis of factors hindering the diffusion of markets for technology, have focused mainly on the
licensor’s dilemma while scant attention has been paid to understanding the licensee’s alleged passive role. Accordingly, the proposed contribution of my dissertation thesis is to provide new insights about the demand-side of markets for technology. First of all, I disentangle the link between licensing-in and diversification strategy in order to test whether the licensing-in decision is consistent with the
relatedness-hypothesis or not and under which circumstances. Second, trying to assess the option value of patent licenses as accrued to the licensee, I analyze the effect of technological and market uncertainty on the value of licensed patents. Third, I focus my attention on the under-developed issue of
learning-by-licensing, in terms of development of new technological knowledge inside the licensee firms (e.g. new patents) and the direction of this learning taking place during the length of the contract. In order to address the three research questions I defined a research design based on data on license agreements signed between 1980 and 2001 involving patents and reporting the remuneration structure as agreed between the licensor and the licensee.