Licensing interim R&D knowledge
Yossi Spiegel, Tel Aviv University
Current version: July 2008
Abstract: This paper considers three firms that engage in a winner-takes-all R&D contest to develop a new technology. For a broad range of parameters, the firm that has the highest probability of success is better-off licensing or selling its superior interim knowledge to one of the two lagging firms or to both rather than holding on to its lead. Although such transfer of interim R&D knowledge erodes the technological lead of the leading firm, it allows it to extract rents from its rivals and can possibly create value by increasing the chance that the licensee(s) will develop the new technology when the leading firm fails.
Keywords: Interim R&D knowledge, exclusive and nonexclusive licensing, transfer of knowledge, cross-licensing

JEL Classification Numbers: D45, O32


Last updated: July 11, 2008