Appropriability and Commercialization: Evidence from Mit Inventions

36 Pages Posted: 18 Aug 2005

See all articles by Emmanuel Dechenaux

Emmanuel Dechenaux

Kent State University - Department of Economics

Brent Goldfarb

University of Maryland - Robert H. Smith School of Business

Marie C. Thursby

Georgia Institute of Technology - Strategic Management Area; National Bureau of Economic Research (NBER)

Scott Shane

Case Western Reserve University - Department of Economics

Date Written: August 10, 2005

Abstract

The effects of appropriability on invention have been well studied, at least since Arrow (1962), but there has been little analysis of the effect of approbriability on the commercialization of existing inventions. Exploiting a database of 966 attempts by private firms to commercialize inventions licensed from MIT between 1980 and 1996, we explore the influence of several appropriability mechanisms on the commercialization and termination of projects to develop products based on university inventions. We construct a theoretical model in which the licensee faces technical and market uncertainty, as well as the risk that others may develop non-infringing substitutes. We characterize the hazards of commercialization and termination as a function of several appropriability mechanisms, including patent scope and strength, the importance of lead time, and secrecy. The model is tested using a competing risks framework that allows for non-parametric unobserved heterogeneity and correlated risks. Patent scope and strength, as well as the importance of lead time, appear to be important in termination and commercialization decisions. Commercialization is also shown to be unlikely until patents are actually awarded.

Keywords: Hazard rates, innovation, optimal stopping problem, patent scope, university licensing

JEL Classification: O31, O34

Suggested Citation

Dechenaux, Emmanuel and Goldfarb, Brent D. and Thursby, Marie C. and Shane, Scott A., Appropriability and Commercialization: Evidence from Mit Inventions (August 10, 2005). Robert H. Smith School Research Paper No. RHS 06-023, Available at SSRN: https://ssrn.com/abstract=782846 or http://dx.doi.org/10.2139/ssrn.782846

Emmanuel Dechenaux

Kent State University - Department of Economics ( email )

Kent, OH 44242
United States

Brent D. Goldfarb (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States
301-405-9672 (Phone)
301-314-8787 (Fax)

Marie C. Thursby

Georgia Institute of Technology - Strategic Management Area ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Scott A. Shane

Case Western Reserve University - Department of Economics ( email )

Cleveland, OH 44106
United States

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