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LOCATION CHOICE AND PATENT LICENSING

Authors

  • YAN-SHU LIN,

    1. National Dong Hwa University, Taiwan
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  • JIN-LI HU,

    1. Institute of Business and Management, National Chiao Tung University, Taiwan
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  • PENG-CHIAO XIA

    1. National Dong Hwa University, Taiwan
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    • The authors are grateful to an anonymous referee and the editor of this journal, Ming-Feng Tsai, Hui-Ling Chung, and the participants at the International Trade Workshop at National Taiwan University for valuable comments. Financial support from Taiwan's National Science Council (NSC99-2410-H-259-009 and NSC99-2410-H-009-063) is gratefully acknowledged. The usual disclaimer applies.


  • Manuscript received 9.8.09; final version received 4.3.11.

Abstract

This paper studies the patent licensing decision when firms can endogenously choose their locations. If the insider patentee is the location leader, the royalty is not necessarily the best method of licensing. No licensing can be the best method for an insider patentee with a sufficiently high degree of innovation, but fixed-fee is always the worst. However, if the non-innovating firm is the location leader, the royalty licensing is always the best method; moreover, the fixed-fee licensing (no licensing) is the second best method if the degree of innovation is relatively small (sufficiently large).

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