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...it will simultaneously satisfy a potential buyer’s need and further impede any subsequent market transaction. For decades, economists have analyzed this underlying problem of the information paradox (=-=Arrow, 1971-=-; Winter, 2006). 1 An earlier version of this paper has been presented at the 66th Annual Meeting of the Academy of Management 2006 in Atlanta, Georgia. The authors thank two anonymous reviewers for t...

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...erformance-oriented contracts used to exploit the value embedded in technical knowledge (Teece, 1986). Licensing activities have motivated a large body of literature covering topics like reasons for (=-=Arora and Fosfuri, 2003-=-; Mottner and Johnson, 2000; Saracho, 2002) and results of (Arrow, 1962; Rockett, 1990) granting licenses, profit maximizing licensing strategies (Fosfuri, 2006; Kamien and Tauman, 2002; Katz and Shap...

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...6; Poddar and Sinha, 2004), ways to distribute the value created between licensor and licensee (Kamien and Tauman, 1986), timing of licensing (before or after developing a technology) (Gallini, 1984; =-=Gallini and Winter, 1985-=-; Shapiro, 1985) and the types of innovations that are transferred (Arora, 1995; Katz and Shapiro, 1985). One stream of research analyzes in detail the information given by licensing agreements. Major...

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...ss knowledge into a specific, standardized expression which can be understood by everyone who is acquainted with this way of expression (Boisot and Child, 1988) 6intellectual property rights (IPRs) (=-=Mudambi and Navarra, 2004-=-; Nonaka and Takeuchi, 1995; Teece, 1998). Explicit knowledge is a public good (Arrow, 1962; Dyer and Nobeoka, 2000; Grant, 2002; Kogut and Zander, 1993; Machlup, 1980; Martin and Salomon, 2003). Once...

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...ry technology and allows an earlier introduction of a product based on each partners’ technology. But at the same time this also provokes the creation of substitutes for the products of each partner (=-=Fershtman and Kamien, 1992-=-). Moreover, cross-licensing might foster collusive behavior of both parties since it either increases (in the case of imperfect substitutes) the probability of a market entry (Eswaran, 1993) and/or e...

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...involuntarily (Nelson et al., 1982). They allow one to be aware of one’s tacit knowledge but at the same time to be unable to articulate it. 4 Synonyms for this dichotomy are codified and uncodified (=-=Choi and Lee, 1997-=-; Teece, 1998), objective and subjective, prepositional and personal, declarative and procedural (Grant, 1996; Kakabadse, et al., 2001; Nahapiet and Ghoshal, 1998; Winter, 1987), internal and external...

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... not only consider technology primarily as a source of future revenue but as a currency or a bargaining chip to be used during the negotiation process in order to achieve their individual objectives (=-=McEvily, et al., 2004-=-; Nickerson, 1996). In view of these considerations, we interpret the existence of contractual terms referring to cross-licenses as an equal mean to compensate the licensor and, therefore, assume: Hyp...

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...eses 2.5.1. Hypotheses: Negotiation period The overall aim of a licensing agreement is to determine the rights and duties of both parties. In general, we can identify four classes of property rights (=-=Alchian and Demsetz, 1973-=-; Coase, 1960; Demsetz, 1967) that can be licensed. A licensee can obtain the right (1) to use, (2) consume and (3) obtain income from and (4) to alienate attributes of the subject of contract. Attrib...

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...er in case that one party infringes a substantial condition of the agreement. 2.4.2. Contract period: Compensation provisions Empirical results show a considerable variety of compensation provisions (=-=Aulakh, et al., 1998-=-; Bessy and Brousseau, 1998; Merwin and Warner, 1996). Apart from lump 13sum payments, the most common means to determine license fees are recurring amount payments and royalty rates. Royalty rates c...

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...ositional and personal, declarative and procedural (Grant, 1996; Kakabadse, et al., 2001; Nahapiet and Ghoshal, 1998; Winter, 1987), internal and external (Zack, 1999) or alienable and non-alienable (=-=Brynjolfsson, 1994-=-; Foss, 2002) knowledge. 5 In this context, codification refers to the possibility to compress knowledge into a specific, standardized expression which can be understood by everyone who is acquainted ...