How does patent transfer affect innovation of firms?

This study examines how a firm's acquisition of external patents affects its rival firms’ innovation activity when a patent can be strategically utilized by the patent purchasing firm. Through our review of patent holdup literature and firms’ strategic utilization of patents, we derive a hypothesis stating that a firm's patent purchase deters its rival firm's development of relevant technologies to that patent if the patent covers crucial technological input for its rival's market operation.Our analysis uses Nortel's patent auction in 2011 and finds supportive evidence for the stated hypothesis. This paper discusses the differences between the nature of the market for patents from the market for technology and how we must incorporate such differences to formulate better innovation policies.
Source: Technological Forecasting and Social Change - Category: Science Source Type: research