Transferability MATTRs: Towards Understanding Antecedents of Strategic Licensing

This paper examines the antecedents of firms’ decisions to license intellectual property (IP). We propose a conceptual framework emphasizing two critical factors: (1) transferability, which we define as the ease of moving knowledge embodied in inventions across firm boundaries, and (2) relevance, representing the invention’s importance to a firm’s value creation and capture processes. Leveraging a novel proxy for transferability—the moving-average type-token ratio (MATTR), which measures the lexical diversity of patent descriptions—we analyze licensing agreements for U.S. patents granted from 1980 to 2015, integrating this data with patent- and firm-level characteristics. The results reveal that higher MATTR is associated with a greater likelihood of licensing, suggesting that firms strategically enhance transferability for potential licensees as they apply for a patent. Moreover, the relationship between transferability and licensing is moderated by the invention’s economic and scientific value, and the degree of demand uncertainty in the industry. These findings contribute to the literature on innovation strategy and technology markets, highlighting the strategic selection of IP for licensing and the dynamic interplay of invention characteristics, firm strategy, and industry context in shaping licensing decisions.