Essays on markets for technology: the role of licensing as a complementary strategy to internal R&D

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Palermo, Vincenzo
Ceccagnoli, Marco
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I study the role of licensed technologies in the R&D development process, the knowledge assimilation mechanism and the patent litigation procedure. I document that the use and adoption of licensed technologies is not a linear process and it has important strategic consequences. First, I focus on the joint effect of external and internal technologies and possible firm-level drivers of this relation. I find that, on average, internal R&D and licensing investments are neither complements nor substitutes. However, firms with higher levels of absorptive capacity, economies of scope, and past licensing experience are able to create positive synergies by combining the two types of investments. In addition, I find that the integration and the adoption of external technology may be limited by internal knowledge accumulation. Firms that experience an inward oriented knowledge accumulation process need to balance the trade-off between internal knowledge reliance and external knowledge assimilation. The negative relation between internal and external knowledge is positively mitigated by two organizational factors: absorptive capacity and the level of decentralization. Finally, assuming that companies are able to adopt external technologies, I find that licensed patents are more reliable than internal ones. In other words, external patents increase the probability of winning a patent lawsuit. Under this circumstance, firms are able to reduce patent uncertainty, limit market entry, and protect future revenue streams.
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