R&D Collaboration with Uncertain Intellectual Property Rights

Patent pendencies create uncertainty in research and development (R&D) collaboration, which can result in a threat of expropriation of unprotected knowledge, reduced bargaining power and enhanced search costs. We show that-depending of the type of collaboration partner and the size of the company-uncertain intellectual property rights (IPRs) lead to reduced collaboration between firms and can, hence, hinder knowledge production. This has implications for technology policy as R&D collaborations are exempt from antitrust legislation in order to increase R&D in the economy. We argue that a functional IPR system is needed for successful utilization of this policy.