Get Pennies from Many or a Dollar from One? Multiple contracting in markets for technology

Using survey data of licensing activities of Japanese firms, this paper studies the interaction between patenting and multiple contracting and their effects on license revenues for large and small licensors. We find that small firms are more likely to license their technologies to multiple licensees and receive more revenue from multiple contracting, confirming a theory that multiple contracting makes small firms less vulnerable in forming profit-sharing alliances with downstream technology users. We also find that patented technologies are less likely to be licensed to multiple licensees. However, patenting itself has no significant effect on increasing license revenues. We provide implication for small firms which want to appropriate from licensing out their technology: it is more difficult to get one dollar from one licensee than it is to accrue pennies from many to make a fortune, even under patent protection. Our result suggests a necessity in providing platforms for active interactions between small innovators and downstream technology users.

Published: Dang, Jianwei, Kazuyuki Motohashi, and Dong Huo, 2022. "Get Pennies from many or get a Dollar from one? Multiple licensing in markets for technology," Technovation, Volume 113 (2022), 102423.
https://www.sciencedirect.com/science/article/abs/pii/S0166497221002042