Frauke Rüther

Out-Licensing in Markets with Asymmetric Information : The Case of the Pharmaceutical Industry

Few large pharmaceutical companies have recently discovered out-licensing of terminated R&D results as a way to recoup some of the significant investments made in R&D and to improve R&D productivity. Our empirical investigation reveals that the licensing partners are preferably young, small and highly specialized companies. This reverses the traditional logic of out-licensing. While out-licensing is usually done because of downstream concerns, our analysis shows that the company which owns the necessary assets for further development (the large pharmaceutical company) sells the license to a firm (the small partner company) which has — at the time of deal closure — no track record to prove its ability to successfully develop the compound.As the lack of a track record does not allow the pharmaceutical company to distinguish between the partner firms based on their development capabilities, these out-licensing deals are characterized by an asymmetric distribution of information. The application of the theory of adverse selection allows deriving managerial recommendations along three dimensions of the out-licensing deal: product coverage, price setting and performance presumption. By making changes along these dimensions, R&D managers are able to reduce the information asymmetry and approximate an equilibrium in the out-licensing market.

Leveraging patent portfolios by utilizing patent aggregating companies

Patent aggregating companies show eight characteristic business models and can be classified in four general archetypes, which are distinct in the rewards they pay the original patent owner and in the competencies they offer.

Leveraging companies’ patent portfolios – State of the art

Based on the derived research objectives (section 1.-1313864729), the following chapter provides a review from the literature streams of patent management, technology market intermediaries, markets for technologies, open innovation, and knowledge management.

Exploring the phenomenon of patent aggregating companies

As patent aggregating companies have emerged as a recent empirical phenomenon, the knowledge of their activities and strategies is limited. These companies are still a black box; therefore, their utilization by producing companies is difficult.

Potentials offered by patent aggregating companies

As an intermediary step in examining whether patent aggregating companies are an option for producing companies, the potentials offered by patent aggregating companies are analyzed.

Typology of patent aggregating companies

All patent aggregating companies acquire patents from producing companies and compensate the original patent owners in a certain way. However, this distinction is not sufficient to provide recommendations on how patent aggregating companies can be utilized by producing companies to leverage patent portfolios.