Science Research Management

Science Research Management ›› 2021, Vol. 42 ›› Issue (6): 49-57.

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When to license? A research on the firms′ decision-making on the timing of patent licensing under different innovation size

Ma Rongkang, Jin He, Zhu Shanshan, Liu Fengchao   

  1. School of Economics and Management, Dalian University of Technology, Dalian 116024, Liaoning, China
  • Received:2018-07-19 Revised:2018-12-25 Online:2021-06-20 Published:2021-06-22

Abstract:     In the era of global division of labor and open innovation, patent licensing has become an important way for enterprises to profit from innovation in the era of open innovation, but it is still an underexplored problem that when to license patents is most beneficial to enterprises. Scholars represented by Schumpeter believe that the size of a company is an important factor affecting its innovation behavior. As an important activity in the commercialization of innovations, patent licensing is also affected by the size of the enterprise. However, the academic community has seldom paid attention to the decision-making of patent licensing time for enterprises with different sizes.
    According to the legalization process of patents, this paper divides the timing of patent licensing into three time points: licensing between application date and disclosure date, licensing between disclosure date and grant date, and licensing after grant date. In the context of China′s patent system, we establish a theoretical model of decision-making on the timing of patent licensing, and to reveal the relationships between firm innovation size and decisions on the three licensing time points.
    We argue that firms with different innovation size have different R&D resources and innovation foundations, which will lead to differences in the initial search costs for patent licenses faced by firms. As the firm innovation size increases, the initial search cost(F) in technology licensing will continue to decline. At the same time, the difference in innovation size will also lead to differences in the possibility of firms being imitated and infringed after the patent is published. As the firm innovation size increases, the degree of difficulty in imitation(R) of technology is also increasing. Therefore, our theoretical model proves that the firm innovation size mainly affects the initial search cost(F) of patent license and the difficulty of imitation of technology(R), which in turn affects the firm′s patent license time decision. Finally, the theoretical model predicts that first, an increase in the firm innovation size will cause an increase in the probability of licensing between application date and disclosure date. Second, an increase in the firm innovation size will cause first an increase and then a decrease in the probability of licensing between disclosure date and grant date, which means that there is an inverted-U relationship between firm innovation size and the probability of licensing between disclosure date and grant date. Third, an increase in the firm innovation size will cause a decrease in the probability of licensing after grant date. Then, using the first-time licensing data of 11865 invention patents during 2001-2016 applied by the Chinese enterprises in the State Intellectual Property Office, we support all the theoretical propositions. 
    This paper expands the firm size to the firm innovation size under the background of innovation commercialization, and confirms the advantages of innovation size in the decision-making of patent licensing time. The main contributions are as follows. First, on the basis of considering the disclosure and grant effects of the patent system, we have established a decision-making model for enterprise patent licensing time under different innovation size. This article reveals that the firm innovation size influences the patent license time by affecting the patent license search cost and the difficulty of patent technology imitation, thus enriching the theoretical research on the decision mechanism of patent license time. Second, this article finds that the relationships between firm innovation size and the licensing probability between the patent application and disclosure and the licensing probability after patent grant are linear, while the relationship between firm innovation size and the licensing probability between patent disclosure and grant is a non-linear inverted U-shape. This poses a challenge to many linear relationship studies in the literature on the influencing factors of patent license time. Obviously, future research should consider both the benefits and costs of the patent licensing time decision from the entire patenting process, and pay special attention to the non-linear effects of the factors influencing the patent licensing time decision. Third, this article uses China as a research context with imperfect patent systems and technology markets, and reveal the patent licensing decision-making mechanism of enterprises with different innovation size. We have expanded the relevant research on patent licensing decision-making in the context of developed countries from the theoretical and empirical levels, and enriched the application context of theoretical models of patent licensing decision-making in developing countries.
    In summary, this study builds a theoretical model to reveal the decision on the timing of patent licensing for enterprises with different innovation size, which has important practical implications for the choice of firms′ technology transfer strategies and the design of technology transfer policies in China.

Key words:  firm innovation size, timing of patent licensing, patent disclosure, patent grant, China