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How does a public innovator license a foreign rival?
Author(s) -
Heywood John S.,
Xu Lu,
Ye Guangliang
Publication year - 2019
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/1467-8454.12141
Subject(s) - innovator , license , business , unit (ring theory) , free riding , industrial organization , economics , incentive , microeconomics , finance , entrepreneurship , political science , law , mathematics education , mathematics
This paper uniquely considers the optimal two‐part fee of a public firm innovator licensing to a more efficient foreign rival. This is both theoretically interesting and empirically relevant. While previous research emphasises the importance of fixed fees for public firms, we show that, in this case, ad valorem fees typically dominate both fixed fees and per unit royalties. This domination carries over when a private domestic competitor is also added to the market.