How are companies paying for university research licenses? Empirical evidence from university-firm technology transfer

Abstract

The knowledge economy has put the triple helix cooperation at the heart of economic growth. In this current paradigm, innovation is vital to firm survival, and universities are seen as an undeniable source of new ideas, talents and ventures. The optimal payment scheme for technology licensing be it from a licensee or licensor point of view is an ongoing debate. Researchers have disputed the advantage of fixed fees versus royalty for both parties involved and the benefits of entering the market for an outsider. A recurrent concern in the literature is the lack of empirical evidence to support these claims. Furthermore, while a plethora of studies defend the superiority of fixed fees over royalty, royalty payments still constitute a major part of licensing income for universities and licensor companies alike. Hence, there is a disconnect between the theoretical optimal payment scheme and the payment scheme adopted by companies and universities. We develop a framework to explain the source of this discrepancy. Using the AUTM STATT database, we analyse the effect of company size on the payment type. Our empirical results show that fixed fees are associated with licenses to large companies while royalty is associated with licenses to small companies. Startups pay neither and give equity instead of payment. Our results point to the importance of government intervention to level the field for different company types, and achieve successful university-industry cooperation and knowledge transfer.