DP4891 Intermediation in Innovation

Author(s):	Heidrun C. Hoppe-Wewetzer, Emre Ozdenoren
Publication Date:	February 2005
Keyword(s):	innovation, Intermediation, market microstructure, matching, patent licensing, uncertainty
JEL(s):	D40, D80, L12, L13, O32
Programme Areas:	Industrial Organization
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=4891

The paper offers a new theoretical framework to examine the role of intermediaries between creators and users of new inventions. We find that uncertainty about the profitability of investing in new inventions generates a basis for intermediation. An intermediary may provide an opportunity to economize on a critical component of efficient investment decisions - the expertise to sort `profitable' from `unprofitable' inventions. Our findings may help explain the surge in university patenting and licensing since the Bayh-Dole Act of 1980. The study also identifies several limitations to the potential efficiency of intermediation in innovation.