Business Commons^™

Cost-Reducing Innovation And The Role Of Patent Intermediaries In Increasing Market Efficiency, Anupam Agrawal, Shantanu Bhattacharya, Sameer Hasija

Research Collection Lee Kong Chian School Of Business

Patent intermediaries have gained importance as non-practicing entities in the innovation domain, buying innovations from an external provider and then licensing them to practicing firms. In this study, we analyze the competition between two identical incumbent firms and a patent intermediary for the acquisition and licensing of a cost-reducing innovation developed by an external innovator. We show that the outcome of the IP acquisition and licensing game critically depends on the degree of the cost-reducing innovation. Patent intermediaries win IP rights in patent markets if the innovation is incremental. They also win the IP rights when the innovation is moderate …