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Knowledge diffusion vs. technological progress: the optimal strength of IPRs protection

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  • Shuai Niu

    (School of Economics, Australian School of Business, The University of New South Wales)

Abstract

By adjusting the strength of IPRs protection, the government can change the extent of knowledge spillovers in R&D. A large spillover rate helps to improve the productivity of the less efficient firms and save on the overall production costs. But, at the same time, it reduces the innovator's incentives to conduct R&D and results in a lower equilibrium innovation level. So, there is an inherent tension between knowledge diffusion and technological progress. In this paper, we formalized this relationship in a two stage asymmetric duopoly model and discussed the optimal IPRs protection policy. The main conclusion is that, to maximize social welfare the strength of IPRs protection should rise as the increase of the innovating firm's R&D efficiency.

Suggested Citation

  • Shuai Niu, 2011. "Knowledge diffusion vs. technological progress: the optimal strength of IPRs protection," Economics Bulletin, AccessEcon, vol. 31(4), pages 2839-2846.
    • Handle: RePEc:ebl:ecbull:eb-11-00653
    as

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    References listed on IDEAS

    as
    1. Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-662, September.
    2. Darmot Leahy & J. Peter Neary, 1997. "Veřejná politiky v oblasti výzkumu a vývoje v oligopolním průmyslu [Public Policy Towards R & D in Oligopolistic Industry]," Politická ekonomie, Prague University of Economics and Business, vol. 1997(5), pages 683-698.
    3. James A. Brander & Barbara J. Spencer, 1983. "Strategic Commitment with R&D: The Symmetric Case," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 225-235, Spring.
    4. Moonsung Kang, 2006. "Trade policy mix: IPR protection and R&D subsidies," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(3), pages 744-757, August.
    5. Moonsung Kang, 2006. "Trade policy mix: IPR protection and R&D subsidies," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 744-757, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    spillovers; knowledge diffusion; technological progress; IPRs;
    All these keywords.

    JEL classification:

    • L0 - Industrial Organization - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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