Cooperation, Competition and Patents: Understanding Innovation in the Telecommunication Sector

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Event details

Date and time 11.03.2021 17:00  
Place and room
Zoom
Speaker Tatiana Rosa (CEMFI)
Category Conferences - Seminars
Tatiana Rosa (CEMFI)
"Cooperation, Competition and Patents: Understanding Innovation in the Telecommunication Sector"
Discussant: Emanuele Tarantino (Luiss Guido Carli)

Abstract
Many modern innovations depend on interconnectivity, which require technology standards as a common language to successfully link up. This paper develops and estimates a structural model to understand how competition between firms affects their incentives to cooperate by supplying technologies to a common standardization process. I study these incentives empirically by focusing on the standardization of the mobile telecommunications technologies. In the model, firms face two decisions. They decide whether to join a group to develop a component of the system and, in that case, how much effort to exert. When making these choices, firms consider 1) how their effort increases the common value, 2) how much of this common value they can privately appropriate through their patents, and 3) their capacity to profit from the technology in the downstream part of the market. In this setting, patents have an ambiguous effect on the development of a common innovation. On the one hand, they alleviate the free-rider problem and induce firms to exert more effort. On the other hand, they bias firms’ participation towards groups with less competition over patented technologies even where their effort may be less valuable. To study the net effect of these forces in equilibrium, I estimate the model using a novel dataset on 3G and 4G technologies. I also show that the enforcement of royalty-free clauses reduces firm participation and effort, ultimately delaying the completion of the initial releases of 4G by almost 1 year.

EPFL Virtual Innovation Seminar
EVIS is a bi-weekly virtual seminar series focusing on Science, Technology and Innovation topics studied through the lens of Economics, Entrepreneurship, Strategy and Finance.