Contract of Selling with Exclusivity by ato74102

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									    The determinants of university
        license arrangements
                                               EXTRA- DIME Conference
                                            Lausanne September 29-30 2006



                                          Stéphane Lhuillery
                           CEMI - Collège du Management de la Technologie
                           EPFL - École Polytechnique Fédérale de Lausanne




Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
     Motivations

     • What kinds of firms are sourcing at
       university technologies through
       transactions?

     • What is the outcome of negociations
       between a famous European University
       and firms


Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
     Motivations

     • What kinds of firms are sourcing at
       university technologies through
       transactions?

     • What is the outcome of negociations
       between a famous European University
       and firms


Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
     Determining factors of Tech
     transaction provisions
   • Theoretical and empirical research:
         –   Scope, strength and height of patents
         –   TTOs governance
         –   Need for long life technological transfers?
         –   Geographic localization
         –   Differentiation of licensors
         –   Financial capabilities licensors
         –   Turnover or product forcasts
         –   Institutional aspects (industry or country level)

Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
     Data
     • EPFL data (1993-2005)
     - 618 declared inventions, 502 technologies, 382
        patents
     - 298 transactions (first transaction + renegotiation +
        software + university to PROs transactions)
     -> Final sample: 194 technology first transactions with
        firms (110 inventions, 160 technologies, 60 labs).


     • Swiss innovation survey (KOF)


Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
     Explained variable ?
     • Technology transaction provisions
       7 dichotomic variables
           -    License or patent selling
           -    Exclusivity (is always 1 for patent selling)
           -    Royalties
           -    Lump sum
           -    Patent costs
           -    Equity
           -    Options

Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
          Hypothesis on determinants(1)
     • On size of licensees:
     H1: Large firms are more likely to buy
       than rent a technology (bargaining
       power).
     H2: Large firms are less likely to
       negotiate options (absorptive capa).
     H3: Large firms are less likely to be able
       to negotiate equities (uncertain
       dividends and low capital gain)
Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
                                      Hypothesis (2)
     • On start-ups:
     H4: Start-ups are more likely to negotiate
       equities since royalties or even lump sums are
       often impossible (or on long run).
     H5: Start-ups are more likely to obtain an
       exclusive licence. Without exclusivity, a start-
       up can always be threaten by potential
       entrants or imitators but as a consequence
       will have more difficulties to convince people
       to invest in shares.

Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
                                      Hypothesis (3)
     • On localization of licensees:
     H6: Firms localized nearby the EPFL are more
       likely to negotiate equities (due to lower
       asymmetries of information on managerial
       skills)
     H7: Firms localized nearby the EPFL are more
       likely to buy patents (localised spillovers)
     H8: Firms localized nearby the EPFL are less
       likely to negotiate variable fees (local
       spillovers reduce the need to involve the lab.
       into the Tech Transfer)

Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
                                      Hypothesis (3)
     • On localization of licensees:
     H6: Firms localized nearby the EPFL are more
       likely to negotiate equities (due to lower
       asymmetries of information on managerial
       skills)
     H7: Firms localized nearby the EPFL are more
       likely to buy patents (localised spillovers)
     H8: Firms localized nearby the EPFL are less
       likely to negotiate variable fees (local
       spillovers reduce the need to involve the lab.
       into the Tech Transfer)

Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
                                      Hypothesis (4)
     • On “dynamic” aspects:
     H9: experienced firms are more likely to obtain from the EPFL,
       patent selling, exclusive rights, and fixed fees.
     H10: licences concluded with known inventors increases the
       bargaining power of the TTO (scope, strength and lower
       uncertainty) and lead rather to licence, non exclusivity,
       fixed fees, plus royalties and patent costs.
     H11: The 2001 Laboratory reform induced a change in TTO
       governance. The 2001 reform induced a reorientation
       toward harder provisions for firms due to bigger faculty and
       laboratories (more royalties and less fixed fees) but also a
       possible in options and equities due to an increase in the
       share of early stage technologies (more math and physics
       and chemistry).


Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
                                      Hypothesis (5)
   • On industry level determinants :
   H12: industry characteristics do influence the structure of
     a licensing contract.
   H13: the faster is the technology cycle, the lower is the
     likelihood to rent technology and to negotiate variable
     fees since it is less interesting for the licensor. (?)
   H14: the faster is the technology cycle, the easier it is to
     invent around a technology in the industry and thus
     necessary to give exclusivity to firms.
   H15: Stronger appropriation regimes boost licences and
     variable fees since enforcement is easier over time.
   H16: firms in differentiated industries are more likely to
     be able to pay on regular basis.
   H17: firms in science based industries are less likely to
     get variable fees and options
Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
         7 equations
Contract Pr ov j   j1STARTUP   j 2 SIZE 2   j 3SIZE 3   j 4CAMPUS   j 5CANTON   j 6 FOREIGN
                    j 7 EXPERIENCES   j 8 NOTORIETY   j 9 REFORM 
                    j10 PROD IND   j11PROC IND   j12 DIFFERENTIATION IND   j13 APPRO IND   j14 SCIENCE IND  u j

          j=1,…,7




  Collège du Management de la Technologie – CDM
  Chaire en Economie et Management de l'Innovation – CEMI
        Econometric issues
       Equations can be estimated separately
       BUT
       -Provisions are not Independent
                    Multivariate models (not converging)
                    SUR model (not
                    Ex ante clustered provisions
       -There is a lot of possible unobserved heterogeneity
                    One level of clustered residuals (ex: on lab. Id)
                    Several possible levels (on inventions, technology, faculty
                    firms, groups of firms, countries) -> MLwiN software from
                    epidemiology studies
       - Selection process need selection equation à la Heckman


Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
        Econometric results




Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
       Main results (1)
  • SMEs and large firms are less likely than very
    small firms (under 10 emp.) to negotiate license
    rather than patent selling.
  • Royalties payment schemes are more likely to be
    negotiated with SMEs than with very small (no
    cash flow) or very large firms that would prefer
    lump sum. However, Lump sum are explained
    significantly only by SMEs.


Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
       Main results (2)
 • Equity are more likely to be settled by Start-ups.
   But start-ups are not different for other
   provisions!!!
 • A further result is that equity is reserved to firms
   located on campus or abroad.
 • Options are more proposed to very small firms or
   large firms than SMEs.
 • More surprising, licences are more likely to be
   settled with foreign firms.
Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
       Main results (3)
  • As expected, exclusivity are more likely to be proposed
    to start-up firms but are not restricted to firms located
    near university as in Mowery and Zedionis (2004).
  • Experienced firms are also more likely to get exclusive
    rights as well as patent costs to pay.
  • Transaction on technologies created by inventors, who
    previously commercialized technologies, are more widely
    diffused since there are fewer selling, fewer exclusivity
    and patent costs.
  • If equity and option are more likely to be settled since
    the 2001 reform.
Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
                                    Main results (4)
     • Industry characteristics hardly explain
       contract provisions.
     • Patent costs and equity are however
       influenced by industry (but on Option and
       Lump sum).
     • The faster is the technological change in
       processes in a industry, the more options are
       given.
     • Equities are negotiated only in differentiated
       industries

Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI
                              For the next draft!
     • Econometric issues (selection, multi level
       grouping of residuals, complementarity)

     • Efforts on RHS variables: 4 aspects
           –    Scope of inventions
           –    Academic records from inventors (SCI data)
           –    Carreer profiles of inventors (HR data)
           –    Patent portofolio of licensees (PAT




Collège du Management de la Technologie – CDM
Chaire en Economie et Management de l'Innovation – CEMI

								
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