Patents, Imitation and Licensing in an Asymmetric Dynamic R&D Race
AbstractR&D is an inherently dynamic process which involves different intermediate steps that need to be developed before the completion of the final invention. Firms are not necessarily symmetric in their R&D abilities; some may have advantages in early stages of the R&D process while others may have advantages in other stages of the process. The paper uses a simple two-firm asymmetric ability multistage R&D race model to analyse the effect of different types of patent policy regimes and licensing arrangement on the speed of innovation, firm value and consumers' surplus. The paper demonstrates the circumstances under which a weak patent protection regime, which facilitates free imitation of any intermediate technology, may yield a higher overall surplus than a regime that awards patent for the final innovation. This result holds even in cases where the length of the patent is optimally calculated.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5481.
Date of creation: Feb 2006
Date of revision:
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Other versions of this item:
- Fershtman, Chaim & Markovich, Sarit, 2010. "Patents, imitation and licensing in an asymmetric dynamic R&D race," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 113-126, March.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-19 (All new papers)
- NEP-BEC-2006-02-19 (Business Economics)
- NEP-COM-2006-02-19 (Industrial Competition)
- NEP-IND-2006-02-19 (Industrial Organization)
- NEP-INO-2006-02-19 (Innovation)
- NEP-MIC-2006-02-19 (Microeconomics)
- NEP-TID-2006-02-19 (Technology & Industrial Dynamics)
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