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Intellectual Property: When Is It the Best Incentive System?

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Author Info
Nancy Gallini (University of Toronto)
Suzanne Scotchmer (Department of Economics and Goldman School of Public Policy, University of California, Berkeley; and NBER)
Abstract

Our objective in this paper is to review what economists have said about incentive schemes to promote R&D, including intellectual property. While we focus on environments in which other forms of protection are not available, we note that other protections can obviate the need for any formal reward system. In Section II, we compare intellectual property to alternative incentive schemes. In Section III we review optimal design issues for intellectual property, especially the question of patent breadth, and in Section IV we turn to the special problems that arise when innovation is cumulative. In Section V, we summarize the arguments for and against intellectual property. We comment on whether the design recommendations of economists can actually be implemented, and argue that IP regimes should be designed so that the subject matter of each one has relatively homogeneous needs for protection.

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Paper provided by Department of Economics, Institute for Business and Economic Research, UC Berkeley in its series Department of Economics, Working Paper Series with number 1010.

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Date of creation: 01 Aug 2001
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Handle: RePEc:cdl:econwp:1010

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Related research
Keywords: intellectual property patents copyrights innovation K3 L5

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Loury, Glenn C, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 395-410, August. [Downloadable!] (restricted)
    Other versions:
  2. Michael Kremer, 1997. "Patent Buy-Outs: A Mechanism for Encouraging Innovation," NBER Working Papers 6304, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-41, June. [Downloadable!] (restricted)
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  4. Ted O'Donoghue & Suzanne Scotchmer & Jacques-François Thisse, 1998. "Patent Breadth, Patent Life, and the Pace of Technological Progress," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 7(1), pages 1-32, 03. [Downloadable!] (restricted)
  5. Klemperer, Paul, 1990. "How Broad Should the Scope of Patent Protection Be?," CEPR Discussion Papers 392, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. d'Aspremont, Claude & Bhattacharya, Sudipto & Gerard-Varet, Louis-Andre, 1998. "Knowledge as a public good: efficient sharing and incentives for development effort," Journal of Mathematical Economics, Elsevier, vol. 30(4), pages 389-404, November. [Downloadable!] (restricted)
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  7. Michael Kremer, 1998. "Patent Buyouts: A Mechanism For Encouraging Innovation," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1137-1167, November. [Downloadable!] (restricted)
  8. Mukesh Eswaran & Nancy Gallini, 1996. "Patent Policy and the Direction of Technological Change," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 722-746, Winter. [Downloadable!] (restricted)
  9. Suzanne Scotchmer & Jerry Green, 1990. "Novelty and Disclosure in Patent Law," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 131-146, Spring. [Downloadable!] (restricted)
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  10. suzanne Scotchmer, 1998. "The Independent-Invention Defense in Intellectual Property," Berkeley Olin Program in Law & Economics, Working Paper Series 1132, Berkeley Olin Program in Law & Economics. [Downloadable!]
  11. Deborah Minehart & Suzanne Scotchmer, 1995. "Ex Post Regret and the Decentralized Sharing of Information," Papers 0058, Boston University - Industry Studies Programme.
  12. Mark Schankerman, 1998. "How Valuable is Patent Protection? Estimates by Technology Field," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 77-107, Spring. [Downloadable!] (restricted)
  13. Laffont, Jean-Jacques & Tirole, Jean, 1987. "Auctioning Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 921-37, October. [Downloadable!] (restricted)
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  14. Nancy T. Gallini & Ralph A. Winter, 1985. "Licensing in the Theory of Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 237-252, Summer. [Downloadable!] (restricted)
  15. Francesca Cornelli & Mark Schankerman, 1999. "Patent Renewals and R&D Incentives," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 197-213, Summer. [Downloadable!] (restricted)
  16. Wright, Brian Davern, 1983. "The Economics of Invention Incentives: Patents, Prizes, and Research Contracts," American Economic Review, American Economic Association, vol. 73(4), pages 691-707, September. [Downloadable!] (restricted)
  17. Lerner, Josh, 1995. "Patenting in the Shadow of Competitors," Journal of Law & Economics, University of Chicago Press, vol. 38(2), pages 463-95, October.
  18. Ted O'Donoghue, 1998. "A Patentability Requirement for Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 654-679, Winter. [Downloadable!] (restricted)
  19. Kitch, Edmund W, 1977. "The Nature and Function of the Patent System," Journal of Law & Economics, University of Chicago Press, vol. 20(2), pages 265-90, October.
  20. Gandal, N. & Scotchmer, S., 1989. "Coordinating Research Through Research Joint Ventures," Papers e-89-27, Stanford - Hoover Institution.
  21. Carl Shapiro, 2000. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting," Competition Policy Center, Working Paper Series CPC00-011, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
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  22. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  23. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March. [Downloadable!] (restricted)
  24. Nancy T. Gallini & Brian D. Wright, 1990. "Technology Transfer under Asymmetric Information," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 147-160, Spring. [Downloadable!] (restricted)
  25. Shavell, Steven & van Ypersele, Tanguy, 2001. "Rewards versus Intellectual Property Rights," Journal of Law & Economics, University of Chicago Press, vol. 44(2), pages 525-47, October.
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  26. Richard Gilbert & Carl Shapiro, 1990. "Optimal Patent Length and Breadth," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 106-112, Spring. [Downloadable!] (restricted)
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  27. Gallini, Nancy T, 1984. "Deterrence by Market Sharing: A Strategic Incentive for Licensing," American Economic Review, American Economic Association, vol. 74(5), pages 931-41, December. [Downloadable!] (restricted)
  28. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November. [Downloadable!] (restricted)
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  30. Minehart, Deborah & Scotchmer, Suzanne, 1999. "Ex Post Regret and the Decentralized Sharing of Information," Games and Economic Behavior, Elsevier, vol. 27(1), pages 114-131, April. [Downloadable!] (restricted)
  31. Lerner, Josh & Merges, Robert P, 1998. "The Control of Technology Alliances: An Empirical Analysis of the Biotechnology Industry," Journal of Industrial Economics, Blackwell Publishing, vol. 46(2), pages 125-56, June. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Henkel, Joachim & von Hippel, Eric, 2003. "Welfare Implications of User Innovation," Working papers 4327-03, Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
    Other versions:
  2. Nisvan Erkal, 2003. "The Decision to Patent, Cumulative Innovation,and Optimal Policy," Department of Economics - Working Papers Series 877, The University of Melbourne. [Downloadable!]
    Other versions:
  3. Michele Boldrin & David K. Levine, 2005. "The economics of ideas and intellectual property," Staff Report 357, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  4. Mario Calderini & Chiara Franzoni, 2004. "Is academic patenting detrimental to high quality research? An empirical analysis of the relationship between scientific careers and patent applications," CESPRI Working Papers 162, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised Oct 2004. [Downloadable!]
  5. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science. [Downloadable!]
  6. Elisabetta Ottoz & Franco Cugno, 2004. "The independent invention defence in a Cournot duopoly model," Economics Bulletin, Economics Bulletin, vol. 12(5), pages 1-7. [Downloadable!]
  7. Thomas Hellmann, 2005. "The Role of Patents for Bridging the Science to Market Gap," NBER Working Papers 11460, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Ganslandt, Mattias, 2008. "Intellectual Property Rights and Competition Policy," Working Paper Series 726, Research Institute of Industrial Economics. [Downloadable!]
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