An innovation adoption model of licensing-in for US start-ups

Abstract

Using the Kauffman panel dataset of US start-ups, we analyse the key determinants of licensing-in adoption. Licensing-in entails an intellectual property contract between the licensor (e.g. upstream established firm) and licensee (e.g. downstream start-up) aiming to bring an innovation to market rapidly. Assuming maximizing of the owner’s managerial utility in the start-up years, we explain licensing-in adoption through firm characteristics like size, R&D and capital structure, as well as other IP types, and controls for year and regional fixed effects, using panel probit estimation with adjustments for sample selection bias and endogeneity. We find key determinants of licensing-in to be owners’ equity, product (rather than service) sales and R&D spend; and then comment on their policy implications for business incubation.