Patentability, Industry Structure and Innovation
AbstractTo qualify for a patent, an invention must be new, useful, and nonobvious. This paper presents a model of sequential innovation in which industry structure is endogenous and a standard of patentability determines the proportion of all inventions that qualify for protection. There is a unique patentability standard, or inventive step, that maximizes the rate of innovation by maximizing the number of firms engaged in R&D. Surprisingly, this standard is more stringent for industries disposed to innovate rapidly. If a single standard is applied to heterogeneous industries, it will encourage entry, and therefore innovation, in some industries while discouraging it in others. The model suggest a number of important implications for patent policy.
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Date of creation: 31 Oct 2003
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Other versions of this item:
- NEP-ALL-2003-11-03 (All new papers)
- NEP-COM-2003-11-03 (Industrial Competition)
- NEP-INO-2003-11-03 (Innovation)
- NEP-MFD-2003-11-03 (Microfinance)
- NEP-TID-2003-11-03 (Technology & Industrial Dynamics)
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