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Innovation Beyond Patents: Technological Complexity as a Protection against Imitation

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  • Henry, Emeric
  • Ruiz-Aliseda, Francisco

Abstract

A large portion of innovators do not patent their inventions. This is a relative puzzle since innovators are often perceived to be at the mercy of imitators in the absence of legal protection. In practice, innovators however invest actively in making their products technologically hard to reverse-engineer. We consider the dynamics of imitation and investment in such protection technologies, both by the innovator and by imitators. We show that it can justify high level of profits beyond patents and can account for the differences across sectors in the propensity to patent. Surprisingly, in general, the protection technologies that yield the highest profits for the innovator are expensive and do not protect well. Our model also allows us to draw conclusions on the dynamics of mobility of researchers in innovative industries.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8870.

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Date of creation: Mar 2012
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Handle: RePEc:cpr:ceprdp:8870

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Keywords: complexity; dynamic games; imitation; innovation;

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References

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  1. Klaus Kultti & Tuomas Takalo & Juuso Toikka, 2007. "Secrecy versus patenting," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 22-42, 03.
  2. Sahuguet, Nicolas, 2006. "Volunteering for heterogeneous tasks," Games and Economic Behavior, Elsevier, vol. 56(2), pages 333-349, August.
  3. Carlos J. Ponce & Emeric Henry, 2011. "Waiting to Imitate: On the Dynamic Pricing of Knowledge," Sciences Po publications info:hdl:2441/eu4vqp9ompq, Sciences Po.
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  5. Boldrin,Michele & Levine,David K., 2008. "Against Intellectual Monopoly," Cambridge Books, Cambridge University Press, number 9780521879286.
  6. James J. Anton & Dennis A. Yao, 2004. "Little Patents and Big Secrets: Managing Intellectual Property," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 1-22, Spring.
  7. Francisco Ruiz Aliseda & Emeric Henry, 2013. "Innovation beyond Patents: Technological Complexity as a Protection against Imitation," Sciences Po Economics Discussion Papers 2013-06, Sciences Po Departement of Economics.
  8. Andreas Park & Lones Smith, 2008. "Caller Number Five and Related Timing Games," Working Papers tecipa-317, University of Toronto, Department of Economics.
  9. Bertomeu, Jeremy, 2009. "Endogenous shakeouts," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 435-440, May.
  10. Horstmann, Ignatius & MacDonald, Glenn M & Slivinski, Alan, 1985. "Patents as Information Transfer Mechanisms: To Patent or (Maybe) Not to Patent," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 837-58, October.
  11. Ronny Razin & Mariagiovanna Baccara, 2008. "Bargaining Over New Ideas: Rent Distribution and Stability of Innovative Firms," Working Papers 08-6, New York University, Leonard N. Stern School of Business, Department of Economics.
  12. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
  13. Bronwyn H. Hall & Christian Helmers & Mark Rogers & Vania Sena, 2012. "The Choice between Formal and Informal Intellectual Property: A Literature Review," NBER Working Papers 17983, National Bureau of Economic Research, Inc.
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Cited by:
  1. Francisco Ruiz Aliseda & Emeric Henry, 2013. "Innovation beyond Patents: Technological Complexity as a Protection against Imitation," Sciences Po publications 2013-06, Sciences Po.

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