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Effects of the Anticommons on R&D: The Case of University Corporation in Japan

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  • Masuyuki Nishijima
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    Abstract

    Patentability of basic research together with complementarity between basic research and commercialization development leads to the problem called "anti-commons" where assigning exclusive rights of a resource to more than one entity reduces usage of the resource. Transition from (not-for-profit) National University to (profit-seeking) University Corporation in Japan may actualize a nightmare of the anti-commons in product innovations of some fields such as biotechnology. This paper, using a two-stage patent race model, shows that we need more expenditure on basic research to compensate for negative effect of the anti-commons on R´&D: as a consequence of the transition to University Corporation, (1) interim expected profits of firms evaluated at the beginning of the commercialization stage become less than half, (2) ex ante expected profits of firms evaluated at the beginning of the basic research stage decrease if total expenditures on basic research under National University is less than twice that under University Corporation, and (3) for social welfare to increase, total expenditure on basic research must increase in the case where consumer surplus is high relative to total revenue from patents and there is a small number of firms competing in the development stage.

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    Bibliographic Info

    Paper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 647.

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    Date of creation: 11 Aug 2004
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    Handle: RePEc:ecm:feam04:647

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    Keywords: Anticommons; Sequential Innovation with Complementarity; University Corporation;

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    1. Aoki, Reiko & Nagaoka, Sadao, 2003. "The Utility Standard and the Patentability of Intermediate Technology," Discussion Paper Series a437, Institute of Economic Research, Hitotsubashi University.
    2. Reiko Aoki & Sadao Nagaoka, 2002. "The Utility Standard and the Patentability of Basic Research," CIRJE F-Series CIRJE-F-160, CIRJE, Faculty of Economics, University of Tokyo.
    3. Susan Rose-Ackerman, 1996. "Altruism, Nonprofits, and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 701-728, June.
    4. Buchanan, James M & Yoon, Yong J, 2000. "Symmetric Tragedies: Commons and Anticommons," Journal of Law and Economics, University of Chicago Press, vol. 43(1), pages 1-13, April.
    5. Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring.
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