Innovation and Ex Ante Consideration of Licensing Terms in Standard Setting

In an effort to produce interoperable products, firms frequently participate in Standard Setting Organizations (SSOs) to collaboratively set technical standards for products used by networks of consumers. Some SSO members say they suffer from a type of holdup: after they sink technology-specific investments in developing and implementing a standard using a particular patented technology the patent owner can set licensing terms that exploit those investments. These members have called on SSOs to enhance competition between patent owners by soliciting and considering licensing terms for competing technologies ex ante, before anointing one as "the standard." However, more competitive licensing terms may dampen incentives to innovate. This paper analyzes the balance between the welfare benefits of the added competition and the welfare costs of reduced innovation. The model of R&D investment and standard setting predicts that both total welfare and consumer welfare are higher when an SSO considered licensing terms ex ante as long as the cost of innovation is not "high." The model also predicts that the welfare benefits of ex ante consideration of licensing terms grow as the costs of innovation falls. However, when the cost of innovation is "high" the negative welfare effects are always small.

If at First You Don't Succeed...: Profits, Prices and Market Structure in a Model of Quality with Unknowable Consumer Heterogeneity

Why are higher quality niches seen as intrinsically more profitable in business circles? Why do high quality products sometimes have a low real price, while it is unusual to see low quality products with high real prices? Can markets have quality differentiation as well as quality bunching? In this paper we develop a new model of quality which explains such phenomena. Our model builds on the idea that even if a customer chooses to purchase a product, it may fail to deliver'. If a product fails to deliver, the customer may wish to choose some other product. A higher quality product has a higher probability of delivering. We model this as a three stage game where firms first choose whether to enter or not, then in the second stage choose their quality and in the last stage, their price. Our model has a number of interesting predictions. First, it suggests that in equilibrium, a wider range of price per unit of quality is to be found for high quality goods than for low quality ones. Second, it provides a theoretical reason for why high quality niches may be more profitable, supporting the common business school idea that the money is at the high end.' Third, it suggests that the nature of the fixed costs of establishing quality plays a critical role in determining when free entry could be consistent with the existence of profits and result in natural oligopolies' and when it would tend to eliminate all profits.

The Complementary Role of Exports and R&D Investments as Sources of Productivity Growth

This paper examines two potential channels of knowledge acquisition that underlie firm productivity growth in the Taiwanese electronics industry: participation in the export market and investments in R&D and/or worker training. We focus on the argument that a firm's own investments in R&D are necessary for the firm to assimilate knowledge or expertise gained from foreign contacts and thus are an important component of the process of learning-by-exporting. Firm-level panel data from 1986, 1991, and 1996 is used to investigate a firm's decision to invest in these two activities and to assess the effects of these investments on the firm's future total factor productivity. The empirical model consists of four equations. The firm's decisions to export and invest in R&D and/or worker training are modeled with a bivariate probit model that recognizes the interdependence of the decisions. We then estimate how participation in these investment activities alters the firm's future productivity trajectory while controlling for the potential selection bias introduced by endogenous firm exit. The primary empirical findings are that, on average, firms that export but do not invest in R&D and/or worker training have significantly higher future productivity than firms that do not participate in either activity. In addition, firms that export and invest in R&D and/or worker training have significantly higher future productivity than firms that only export. These findings are consistent with the hypothesis that export experience is an important source of productivity growth for Taiwanese firms and that firm investments in R&D and worker training facilitate their ability to benefit from their exposure to the export market.

A New Model of Quality

We develop a new model of quality to capture the idea that even if a customer chooses to purchase a product, it may fail to deliver.' In this event, the customer may wish to choose some other product. We model this as a two stage game where firms first choose quality and then price. We find that in equilibrium, the high quality firm (the one with a higher probability of being able to deliver') will always make higher profits than the low quality one even if costs of quality are sharply increasing. Our work thus provides a reason for high quality niches to be inherently more profitable. The implications for welfare and equilibrium under free entry are also studied.

Comparison of hybridization-based and sequencing-based gene expression technologies on biological replicates

<p>Abstract</p> <p>Background</p> <p>High-throughput systems for gene expression profiling have been developed and have matured rapidly through the past decade. Broadly, these can be divided into two categories: hybridization-based and sequencing-based approaches. With data from different technologies being accumulated, concerns and challenges are raised about the level of agreement across technologies. As part of an ongoing large-scale cross-platform data comparison framework, we report here a comparison based on identical samples between one-dye DNA microarray platforms and MPSS (Massively Parallel Signature Sequencing).</p> <p>Results</p> <p>The DNA microarray platforms generally provided highly correlated data, while moderate correlations between microarrays and MPSS were obtained. Disagreements between the two types of technologies can be attributed to limitations inherent to both technologies. The variation found between pooled biological replicates underlines the importance of exercising caution in identification of differential expression, especially for the purposes of biomarker discovery.</p> <p>Conclusion</p> <p>Based on different principles, hybridization-based and sequencing-based technologies should be considered complementary to each other, rather than competitive alternatives for measuring gene expression, and currently, both are important tools for transcriptome profiling.</p