J. David Pérez-Castrillo

The Role of Information in Licensing Contract Design

Abstract This paper analyzes the contract terms of licensing agreements, based on a sample of contracts of transmission of technology between Spanish and foreign firms. It also presents a model that is in accordance with some stylized facts. We will focus our attention on the elements that explain the contract terms. In particular we analyze the consequences of the inclusion of know-how in the license agreement on the contract terms.

Endogeneizing Know-How Flows through the Nature of R&D Investments

In this Paper we carefully link knowledge flows to and from a firm’s innovation process with this firm’s investment decisions. Three types of investments are considered: investments in applied research, investments in basic research, and investments in intellectual property protection. Only when basic research is performed, can the firm effectively access incoming knowledge flows and these incoming spillovers serve to increase the efficiency of own applied research. The firm can at the same time influence outgoing knowledge flows, improving appropriability of its innovations, by investing in protection. Our results indicate that firms with small budgets for innovation will not invest in basic research. This occurs in the short run, when the budget for know-how creation is restricted, or in the long run, when market opportunities are low, when legal protection is not very important, or, when the pool of accessible and relevant external know-how is limited. The ratio of basic to applied research is non-decreasing in the size of the pool of accessible external know-how, the size and opportunity of the market, and, the effectiveness of intellectual property rights protection. This indicates the existence of economies of scale in basic research due to external market related factors. Empirical evidence from a sample of innovative manufacturing firms in Belgium confirms the economies of scale in basic research as a consequence of the firm’s capacity to access external knowledge flows and to protect intellectual property, as well as the complementarity between legal and strategic investments.

Centralized and Decentralized Contracts in a Moral Hazard Environment

The authors study the optimal allocation of the contracting capacity in a moral hazard environment. Centralizing is superior when the principal is able to establish all the contracts with the agents simultaneously and she is able to monitor side contracting between the agents. Otherwise, decentralizing can be a superior strategy. The authors apply their results to a firms decision on which outlets to franchise. They suggest that franchising is more likely to occur the further the store is from headquarters, the more isolated it is, and in those activities where the risk is low. This conclusion is consistent with empirical studies. Copyright 1998 by Blackwell Publishing Ltd

OPTIMAL AUDITING WITH HETEROGENEOUS INCOME SOURCES

The optimal enforcement policy when households are heterogeneous, with respect to both income level and to income source, leads to more intense income auditing for easy to-monitor sources. The authors obtain the common result that within each income source any taxpayer reporting less than a predetermined cut-off level will be audited, while taxpayers reporting at least this level will never be audited. However, this audit policy leads to very different reporting behavior depending on the income source. The Internal Revenue Service does not audit only honest taxpayers, and an increase in the audit budget may lead to a larger segment of full evaders. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Optimal tax auditing when some individuals need not file

In a situation in which people who are required to fill in a tax-return coexist with tax-return-exempt people, we prove that the optimal audit policy leads to different tax compliance behavior, depending on the difficulty of detecting an evader who does not fill in a tax return, passing himself of as a non-taxpayer.

Instability in the labor market for researchers

R&D is both an activity which involves team effort, and with many of the features of a zero-sum game. This paper shows that these characteristics make the labor market for researchers unstable in the sense that firms have incentives to continuously change the composition of their research teams. Related results concerning the core of several cooperative games in characteristic form are also proved.