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Deals not done: Sources of failure in the market for ideas
Author(s) -
Agrawal Ajay,
Cockburn Iain,
Zhang Laurina
Publication year - 2015
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.2261
Subject(s) - monopoly , market failure , salient , negotiation , relevant market , economics , process (computing) , industrial organization , intellectual property , business , market economy , microeconomics , law , political science , computer science , operating system
Using novel survey data on technology licensing, we report the first empirical evidence linking the three main sources of failure emphasized in the market design literature (lack of market thickness, congestion, lack of market safety) to deal outcomes. We disaggregate the licensing process into three stages and find that, although lack of market thickness and deal failure are correlated in the first stage, they are not in the latter stages, underscoring the bilateral monopoly conditions under which negotiations over intellectual property often occur. In contrast, market safety is only salient in the final stage. Several commonly referenced bargaining frictions (congestion) are salient, particularly in the second stage. Also, universities and firms differ in the stage during which they are most likely to experience deal failure . Copyright © 2014 John Wiley & Sons, Ltd.