This paper analyzes how university patents encourage university-firm collaboration for technology transfer. Focusing on factors other than competition, I find that the two may not collaborate either because the firm finds in-house development cheaper, or because of a disagreement about the potential product's profitability. In both cases, university patents can encourage collaboration by increasing the invention's diffusion time, and therefore play a role even in the absence of any competition. The model also suggests instances in which we can expect to see a greater impact of university patents on collaboration. Even when patents increase collaboration, they do not necessarily increase welfare. The findings are relevant for the debates on the Bayh-Dole Act, which gave universities a blanket right to patent and license inventions resulting from federally funded research.
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