RT Generic
T1 Licensing radical product innovations to speed up the diffusion
A1 Avagyan, Vardan
A1 Esteban-Bravo, Mercedes
A1 Vidal-Sanz, Jose M.
A2 Universidad Carlos III de Madrid. Departamento de Economía de la Empresa, 
AB Inventors can commercialize innovative products by themselves and simultaneously license thetechnology to other firms. The licensee may cannibalize sales of the licensor, but this can becompensated by gains from royalties. We show in this paper how licenses can be usedstrategically to speed up the new product diffusion process in two instances of markets: (i) amarket with strong Intellectual Property Rights (IPR), and (ii) a market with weak IPR holder andpirate rivals. The main findings suggest that licensing is a beneficial strategy for a licensor in thecontext of strong IPR, because licensor benefits from the royalties, the advertising investment andpositive word-of-mouth effects by licensees. We compare this result with a weak IPR context,where piracy speeds up the product diffusion but this does not compensate IPR holder for the salesloss effect who is willing to license to get some royalties. However, pirates do not generally findinteresting the licensing agreement. We present a comparative statics analysis based on numericalsimulation.
YR 2011
FD 2011-11
LK https://hdl.handle.net/10016/12692
UL https://hdl.handle.net/10016/12692
LA eng
NO Research funded by two research projects, by the Comunidad de Madrid and the Spanish Government
DS e-Archivo
RD 1 may. 2024