Technology transfer with moral hazard

Research output: Contribution to journalArticle

70 Citations (Scopus)

Abstract

This paper develops an incomplete contract model of the licensing relationship that is susceptible to the moral hazard problem. The optimal contractual form of licensing derived in the model generates predictions that seem to be consistent with actual practice. For instance, the introduction of inputs that are not contractible and costly explains the prevalence of royalty contracts in the licensing relationship. Moreover, the model is able to relate the size of the royalty rate to the parameters that represent the environments under which the concerned parties operate. Finally, the model can be naturally extended to analyze the choice of a technology holder between direct investment and licensing in an attempt to serve a foreign market.

Original languageEnglish
Pages (from-to)249-266
Number of pages18
JournalInternational Journal of Industrial Organization
Volume19
Issue number1-2
DOIs
Publication statusPublished - 2001 Jan 1

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Technology transfer
Hazards
Moral hazard
Licensing
Royalty

All Science Journal Classification (ASJC) codes

  • Industrial relations
  • Aerospace Engineering
  • Strategy and Management
  • Industrial and Manufacturing Engineering

Cite this

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Technology transfer with moral hazard. / Choi, Jay Pil.

In: International Journal of Industrial Organization, Vol. 19, No. 1-2, 01.01.2001, p. 249-266.

Research output: Contribution to journalArticle

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