Contractual governance and the choice of dispute-resolution mechanisms: Evidence on technology licensing

V. Duplat, R. Coeurderoy, J. Hagedoorn

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

In fast-paced and knowledge-intensive environments, licensing partnerships can be powerful levers for market expansion. Research on the management of technology-oriented licenses has nonetheless pointed out the risks of corrosive disputes caused by conflicting interests or misunderstandings among licensing partners. The choice made ex ante on mechanisms for resolving potential disputes is of prime importance in the execution of licensing exchanges. Although the legal literature has widely emphasized the advantages of arbitration towards litigation, public ordering remains the "default" option in managers' eyes. By adopting a transaction cost economics logic, our study explores the conditions under which licensing partners may prefer arbitration over public ordering during the contractual-design phase. In accordance with our theoretical arguments, findings show that the occurrence of arbitration provisions increases when the coordination orientation adopted by licensing partners is extensive. In situations where both monitoring and coordination orientations are simultaneously extensive, results reveal a greater propensity to prefer arbitration over public ordering. Our research therefore supports the view that corporate decision-makers tend to favor the conciliatory stance and compromising awards typically associated with arbitration, only when exchanges are expected to be highly coordinative. Their preference for arbitration over litigation is magnified when the coordination orientation develops alongside the monitoring orientation.
Original languageEnglish
Pages (from-to)1096-1110
Number of pages15
JournalResearch Policy
Volume47
Issue number6
DOIs
Publication statusPublished - 1 Jul 2018

JEL classifications

  • l24 - "Contracting Out; Joint Ventures; Technology Licensing"
  • l14 - "Transactional Relationships; Contracts and Reputation; Networks"
  • o32 - Management of Technological Innovation and R&D
  • k12 - Contract Law
  • d86 - Economics of Contract: Theory

Keywords

  • Arbitration
  • Contract design
  • Dispute
  • Technology licensing
  • Decision making
  • Economics
  • Dispute resolution mechanisms
  • Management of technology
  • Theoretical arguments
  • Transaction cost economics
  • Laws and legislation
  • TRANSACTION COSTS
  • STRATEGIC ALLIANCES
  • COORDINATION COSTS
  • APPROPRIATION CONCERNS
  • INTERORGANIZATIONAL RELATIONSHIPS
  • FORMAL CONTRACTS
  • EXCLUSIVE RIGHTS
  • EMPIRICAL-EVIDENCE
  • ECONOMIC-ORGANIZATION
  • PATENT PROTECTION

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