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Domestic patenting systems and foreign licensing choices

Tsai, Yingyi; Mukherjee, Arijit

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Yingyi Tsai

Professor of Industrial Economics


This paper examines a foreign technology holder’s licensing choices between royalty and fixed-fee scheme. We emphasize that foreign licensor chooses the quality of licensed technology when the licensee country does not implement perfect intellectual property protection for licensor’s technology. We study quality choice as the foreign licensor’s selection for a particular grade of technical skills. We show that fixed fee emerges as the equilibrium licensing scheme when both the transfer of his technology is relatively efficient and the licensee is sufficiently cost competitive in the domestic market, and that royalty licensing prevails otherwise. We further show it need not hold the general belief that welfare in the licensor country unambiguously rise with a stronger patenting system in the licensee country when, in particular, such patenting system in place is sufficiently lax.


Tsai, Y., & Mukherjee, A. (in press). Domestic patenting systems and foreign licensing choices. Journal of Economics,

Journal Article Type Article
Acceptance Date Jan 17, 2017
Online Publication Date Feb 10, 2017
Deposit Date Feb 14, 2017
Publicly Available Date Feb 14, 2017
Journal Journal of Economics
Print ISSN 0976-5239
Electronic ISSN 1617-7134
Publisher Kamla-Raj Enterprises
Peer Reviewed Peer Reviewed
Keywords Intellectual Property Protection; Licensing; Quality of the licensed technology; Welfare
Public URL
Publisher URL
Additional Information The final publication is available at Springer via


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