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Patent Protection and Strategic Delays in Technology Development: Implications for Economic Growth

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  • Maggie Xiaoyang Chen

    ()
    (Department of Economics/Elliott School of International Affairs, George Washington University, 2115 G Street, NW, Suite 367, Washington, DC 20052, USA)

  • Murat Iyigun

    ()
    (Department of Economics, University of Colorado at Boulder, 256 UCB, Boulder, CO 80309, USA, and IZA)

Abstract

We present an endogenous growth model in which both the investment to develop a new technology— that upgrades the quality of machines—and entry of imitators are determined endogenously. According to the model, how soon the new-technology machine is launched after the patent is granted is influenced by two factors: returns to scale in technology development and "strategic delays." Strategic delays in technology development are most likely to occur when earlier dates of success enable imitators to enter an industry, that is, when imitation is swift and relatively cheap and/or patent protection is relatively lengthy. We then explore the link between the optimal patent length and economic growth and find that the equilibrium investment in technology development and thus the expected rate of technological progress exhibit an inverted U-shape relationship with respect to the legal patent length.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 78 (2011)
Issue (Month): 1 (July)
Pages: 211-232

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Handle: RePEc:sej:ancoec:v:78:1:y:2011:p:211-232

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Cited by:
  1. Shiyuan Pan & Mengbo Zhang & Heng-fu Zou, 2013. "The Effects of Patent Protection: A Growth Model with Status Preference," CEMA Working Papers 574, China Economics and Management Academy, Central University of Finance and Economics.
  2. Chu, Angus C. & Leung, Charles Ka Yui & TANG, C. H. Edward, 2012. "Intellectual property rights, technical progress and the volatility of economic growth," MPRA Paper 38132, University Library of Munich, Germany.
  3. Chu, Angus C. & Pan, Shiyuan, 2013. "The Escape-Infringement Effect Of Blocking Patents On Innovation And Economic Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 17(04), pages 955-969, June.
  4. Davis, Lewis S. & Şener, Fuat, 2012. "Private patent protection in the theory of Schumpeterian growth," European Economic Review, Elsevier, vol. 56(7), pages 1446-1460.
  5. Katharine Rockett, 2009. "Property Rights and Invention," Economics Discussion Papers 663, University of Essex, Department of Economics.
  6. Shiyuan Pan & Mengbo Zhang & Heng-fu Zou, 2011. "Status Preference and the Effects of Patent Protection: Theory and Evidence," CEMA Working Papers 588, China Economics and Management Academy, Central University of Finance and Economics.
  7. Chu, Angus C. & Pan, Shiyuan & Sun, Minjuan, 2012. "When does elastic labor supply cause an inverted-U effect of patents on innovation?," Economics Letters, Elsevier, vol. 117(1), pages 211-213.
  8. Cysne, Rubens P. & Turchick, David, 2012. "Intellectual property rights protection and endogenous economic growth revisited," Journal of Economic Dynamics and Control, Elsevier, vol. 36(6), pages 851-861.
  9. Sorek, Gilad, 2011. "Patents and quality growth in OLG economy," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 690-699.

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