Patent Thickets, Licensing and Innovative Performance

Posted by D. Daniel Sokol

Iain M. Cockburn (BU Economics), Megan J. MacGarvie (BU Economics), and Elisabeth Müller (ZEW Centre for European Economic Research) discuss Patent Thickets, Licensing and Innovative Performance.

ABSTRACT: We examine the relationship between fragmented intellectual property (IP) rights and innovative performance, taking into consideration the role played by in-licensing of IP. Controlling for a variety of firm and market characteristics, we find that firms facing more fragmented IP landscapes are more likely to report expenditures on in-licensing and for those firms that do incur license costs we find a weak positive association between licensing expenditure and fragmented IP rights in the relevant technology. We also observe a negative relationship between IP fragmentation and innovative performance, but only for firms that engage in in-licensing and only for product innovation. The relationship between fragmentation and innovative performance also depends on the size of a firm’s patent portfolio, which suggests an important strategic role for defensive patenting in the context of fragmented property rights.