Abstract
Adoption of a new product by a multiproduct finn may affect all its sales by altering its reputation as an innovator If adopting a success has a ‘halo effect’ that enhances the adopter's reputation, then an inventor's licensing profit exceeds monopoly profit from the new product If adopting a failure has a ‘black-eye effect’ that damages the adopter's reputation, then an inventor's licensing profit is maximized by a fixed fee, not an auction When both effects are present, an inventor licenses new products that are likely to succeed, but enters with those that are likely to fail
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