Delcamp and Leiponen empirically examine the effects of industry consortia on the coordination of members' innovation strategies. They use membership data from 32 consortia in a variety of wireless telecommunications technology subfields from 2000 to 2005, along with cross-citations between patents declared essential by the consortium participants in the context of the third-generation wireless telecommunication system UMTS and the members' earlier patents. Their results shed new light on the role of consortia in enabling the coordination of innovation in a network-technological industry. The researchers find that co-membership of two firms in an informal technical consortium significantly increases the likelihood that they cite each other's patents in subsequent UMTS essential patents. In other words, inventions that are likely to become part of the UMTS telecommunication system tend to build on inventions by peers that were members in the same consortia, controlling for patent or firm fixed effects, technology class, and other characteristics.On one hand, consortia may enhance productivity of innovation and increase the incentives to invest in R and D by internalizing potential innovation externalities. On the other hand, these results are aligned with the interpretation that consortia structure may constrain the process of innovating standardized technologies. This could be problematic, because the process might not be truly accessible for all interested parties. Policymakers therefore need to balance the two effects. For managers, the results show that participation in a variety of technical consortia enables influencing peers' innovation strategies that are related to the relevant compatibility standards.
This paper was distributed as Working Paper 18179, where an updated version may be available.
In a model of industry standard setting with private information about firms' intellectual property, Ganglmair and Tarantino analyze firms' incentives to contribute to the development and improvement of a standard, and the firms' decision to disclose the existence of relevant intellectual property to other participants of the standardization process. The researchers find that a firm's incentives to contribute are stronger the stronger is its own intellectual property and the weaker is its product market competition. Firms strategically delay disclosure of their intellectual property to other participants, with the propensity to delay being stronger in more innovative standardization processes and when the firm's intellectual property is stronger, that is., the patent more likely to be found valid. The authors further discuss the implications of product market collusion and the existence of a "lead firm" on firms' incentives, and the conditions under which firms will enter a cross-licensing agreement.
This paper was distributed as Working Paper 17999, where an updated version may be available.
Hopenhayn and Mitchell study an environment where a duopoly develops innovations that build on one another and compete. Because the quality of innovations is unobserved, rewards take the form of rights to produce the resulting products. There is a tradeoff between encouraging one firm to work on its innovations by granting it promised rights and the fact that those rights deteriorate the rights of its competitors. In a world where the planner is concerned with optimally generating innovations from the firms, the optimal allocations result is monopolization: eventually one firm is promised nearly everything, and the competitor is almost completely ignored. This occurs because the planner has a strong incentive to back-load rewards. Hopenhayn and Mitchell argue that the back-loading motive is different from existing ones in the literature: it further explains the state-dependent protection results computed earlier, generating heterogeneity in patent protection in the absence of heterogeneity in innovation opportunities. The optimal evolution of the duopoly resembles competition "for the market" but the back- loading implies that competition for the market eventually leads to near-permanent monopolization by one firm.
Empirical scholarship on the standards-trade relationship has been held up because of methodological challenges: measurement, varied effects, and endogeneity. Considering the trade effects of one particular standard (ISO 9000), Clougherty and Grajek surmount such methodological challenges by measuring standardization via national penetration of ISO 9000, allowing standardization to manifest via multiple (quality-signaling, information/compliance-cost, and common-language) channels, and using instrumental variable, multilateral resistance, and panel data techniques to overcome endogeneity. They find evidence of common-language and quality-signaling augmenting country-pair trade. Yet, ISO-rich nations (most notably European) benefit the most from standardization, while ISO-poor nations find ISO 9000 to represent a trade barrier due to compliance-cost effects.
This paper was distributed as Working Paper 18132, where an updated version may be available.
Patent assertion entities, sometimes known as 'patent trolls,' do not manufacture goods themselves but profit from licensing agreements that they often enforce via the threat of litigation. Tucker explores how litigation by one such patent troll affected the sales of medical imaging technology. She finds evidence that, relative to similar products made by the same firm but not covered by the patent, imaging software sales declined by one third. This was not because of a suppression in demand by hospitals but rather is linked to a lack of incremental product innovation during the period of litigation.
Patent pools, which allow competing firms to combine their patents as if they are a single firm, have become one of the most prominent mechanisms to address problems with the current patent system. Regulators expect pools to encourage innovation by limiting litigation risks for pool members and by lowering transaction costs and license fees for outside firms. There is, however, no empirical evidence on the effects of contemporary pools on innovation because modern pools are too recent to observe their effects on innovation. Lampe and Moser investigate patent pools in 20 industries that formed from 1930 to 1938, the last golden age of patent pools before the current period. Difference-in-difference estimates across industries indicate a substantial decline in patenting after the formation of a pool. An analysis at the level of individual technologies indicates that the decline is strongest for technologies where more than one pool member was an active inventor before the creation of a pool, suggesting that pools may discourage innovation in pool technologies by weakening competition.
Barcodes and barcode scanners transformed the grocery industry in the 1970s. Basker uses store-level data from the 1972, 1977, and 1982 Census of Retail Trade, matched to data on store scanner installations, to estimate scanners' effect on labor productivity. Basker finds that early scanners increased a store's labor productivity, on average, by approximately 4.5 percent in the first few years. The effect was larger in stores carrying more packaged products, consistent with the presence of network externalities. Short-run gains were small relative to fixed costs, suggesting that the impediment to widespread adoption of the new technology was profitability, not coordination problems.
This paper was distributed as Working Paper 17825, where an updated version may be available.
International Standards and International Trade: Empirical Evidence from ISO 9000 Diffusion
Patent Commons, Thickets, and Open Source Software Entry by Start-Up Firms
A Tale of Two Standards: Patent Pools and Innovation in the Optical Disk Drive Industry
Patent Disclosure in Standard Setting
Raising the Barcode Scanner: Technology and Productivity in the Retail Sector