Unilateral vs. cross licensing:A theory and new evidence on the firm-level determinants

This paper examines the firm level determinants of the incidence of cross-licensing. It develops a simple stochastic theory explaining such incidence, and confirms its implications based on new dataset of licensing contracts by Japanese firms. Among major findings are: (1) Licensing probability has an almost linear relationship with the size of a potential licensor. (2) Cross-licensing is more prevalent between large and symmetric firms. (3) A licensing contract with only patents is more likely to involve cross-licensing than that with only trade secret. (4) A licensor is on the average larger than a licensee.