We show the effects of the unionization structure (viz., decentralized and centralized unions) on a firm's incentive for technology licensing and innovation. The incentive for technology licensing is stronger under decentralized unions. We identify circumstances under which the benefit from licensing creates a stronger incentive for innovation under decentralized unions. If the union's preference for employment is high, the benefit from licensing may create higher incentive for innovation under decentralized unions. However, if the union's preference for wage is high enough, the incentive for innovation is higher under a centralized union irrespective of licensing ex-post innovation. If the centralized union decides whether or not to supply workers to all firms, the possibility of higher innovation under decentralized unions increases. We further show that perfectly substitutable workers can be better off under decentralized unions if the labor productivity depends on the unionization structure, which occurs in our analysis when, e.g., licensing after innovation occurs only under decentralized unions or innovation (with no licensing) occurs only under a centralized union.

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Keywords Centralized union, Decentralized union, Innovation, Licensing, Union utility, downstream market, upstream market, welfre
JEL Oligopoly and Other Forms of Market Imperfection (jel D43), Trade Unions: Objectives, Structure, and Effects (jel J51), Oligopoly and Other Imperfect Markets (jel L13), Innovation and Invention: Processes and Incentives (jel O31), Intellectual Property Rights: National and International Issues (jel O34)
Persistent URL dx.doi.org/10.1016/j.ijindorg.2010.06.001, hdl.handle.net/1765/20586
Series ERIM Top-Core Articles
Journal International Journal of Industrial Organization
Mukherjee, A, & Pennings, H.P.G. (2011). Unionization structure, licensing and innovation. International Journal of Industrial Organization, 29(2), 232–241. doi:10.1016/j.ijindorg.2010.06.001