The heterogeneous effects of patent scope on licensing propensity

Abstract

How does patent scope influence licensing propensity of inventions? Prior studies have often been confined to specific industries or settings, and their results have been mixed with studies showing a positive, a negative, or even no significant relationship. Also, while some have explored moderating factors that might influence the patent scope-licensing relationship, a systematic investigation of the heterogeneous effects of patent scope on licensing at the invention level has not been undertaken. This study combines a broad sample of publicly reported patent licensing agreements and a novel methodology that captures an exogenous variation in patent scope to re-investigate the relationship between patent scope and licensing and to explore key invention and inventor characteristics that could influence this relationship. The results show that narrowed patent scope leads to a substantial decline in licensing propensity of inventions and that the effect is stronger for high-quality, science-based, and novel inventions as well as for inventions generated by small inventors.