The Value of Tacit Knowledge: Dynamic Inventor Activity in the Commercialization Phase

Roger Svensson & Per Botolf Maurseth (BI - Norwegian Business School), “The Value of Tacit Knowledge:  Dynamic Inventor Activity in the Commercialization Phase”

The inventor generally knows more about the invention than what is written down in a patent application. Because of such tacit knowledge, it might be necessary that the inventor has an active role when the patent is commercialized. We build on Arora (1995) and model firm-inventor co-operation in commercialization of a given invention. Because of tacit knowledge, inventor activity is warranted. Due to moral hazard problems, incentives for inventor activity are limited. We analyse when first best inventor activity is achieved in a two-stage contract. In the empirical part, we analyze when inventor activity is important for a successful commercialization of patents by using a detailed patent database.