Patent thickets, licensing and innovative performance

Abstract

We examine the relationship between fragmented intellectual property (IP) rights and the innovative performance of firms, taking into consideration the role played by in-licensing of IP. We find that firms facing more fragmented IP landscapes have a higher probability of in-licensing. For firms with small patent portfolios we also find a positive association between fragmentation and licensing costs as a share of sales. We observe a negative relationship between IP fragmentation and innovative performance, but only for firms that engage in in-licensing. In contrast, greater IP fragmentation is associated with higher innovative performance for firms that do not in-license. Furthermore, the effects of fragmentation on innovation also appear to depend on the size of a firm’s patent portfolio. These results suggest that the effects of fragmentation of upstream IP rights are not uniform, and instead vary according to the characteristics of the downstream firm. --patent thickets,licensing,innovative performance