TitleTechnology-Transfer, Licensing Contracts, and Incentives for Further Innovation
AuthorsLarson B. A., Anderson M.
PublicationAmerican Journal of Agricultural Economics. 1994 Aug; 76(3):547-556.
AbstractTechnology licensing is common in agricultural and natural resource sectors. An important characteristic of technology licenses is that they provide incentives for further innovation on the part of the buyer. This paper develops a risk sharing model to analyze how risk preferences and expectations about further innovation possibilities alter technology payments and the incentives for complementary local innovation. Higher buyer risk aversion, which is associated with lower fixed payments, reduces the technology buyer's level of innovation. Sellers are generally better off when innovation is anticipated, but buyers are generally better off when innovation is unanticipated, although less innovation may be realized.