Essays on Patent Licensing: Externalities, Organized Activism, and Cooperatives

This dissertation consists of two essays that examine the impact of technological externalities, organized activism, and organizational form on patent licensing of process and product innovations. The first essay develops a game theoretical model to examine the impact of technological externalities and organized activism on the licensing of a food-safety enhancing technology. The technological externality emanates from the public nature of the food safety issue. One of the key results of the study is that interestingly, and perhaps counterintuitively, accounting for the externality makes it less, rather than more, likely that the innovator will find it optimal to license her technology. Specifically, accounting for the externality limits the feasibility of licensing when firms expect that the recall might be caused by the innovating firm and followed by a consumer response that punishes the innovator more than other market participants. Regarding organized activism, our model predicts also that it is more likely for licensing to occur when the activist target the high-quality firm. The second essay develops sequential game-theoretic models of technology licensing in pure and mixed oligopolies to examine the market and welfare impacts of cooperative involvement in the licensing of cost-reducing process innovations. Analytical results show that the organizational form does matter in technology licensing; cooperative behavior differs from that of its investor-owned counterparts yielding significantly different equilibrium outcomes in mixed oligopolies both with the cooperative as a licensor and as a licensee of process innovation involved. While our analysis focuses on cooperative involvement in licensing, the explicit consideration of pre-innovation cost differences and heterogeneity in consumer preferences enables also the provision of important new insights on the licensing behavior and outcomes in pure oligopolies