Working Paper: CEPR ID: DP4891
Authors: Heidrun C. Hoppe; Emre Ozdenoren
Abstract: The paper offers a new theoretical framework to examine the role of intermediaries between creators and users of new inventions. We find that uncertainty about the profitability of investing in new inventions generates a basis for intermediation. An intermediary may provide an opportunity to economize on a critical component of efficient investment decisions - the expertise to sort `profitable' from `unprofitable' inventions. Our findings may help explain the surge in university patenting and licensing since the Bayh-Dole Act of 1980. The study also identifies several limitations to the potential efficiency of intermediation in innovation.
Keywords: innovation; intermediation; market microstructure; matching; patent licensing; uncertainty
JEL Codes: D40; D80; L12; L13; O32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Uncertainty regarding profitability (D89) | Emergence of intermediaries (D40) |
| Success-based payment structures (J33) | Intermediary behavior (D16) |
| Intermediary behavior (D16) | Outcomes for firms (L21) |
| Number of inventions exceeds threshold (O31) | Intermediary behavior (D16) |
| Number of intermediaries (L14) | Quality of matches (L15) |