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A Patentability Requirement For Sequential Innovation

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  • Ted O'Donoghue

Abstract

This paper investigates patent protection when there is a long sequence of innovations and firms repeatedly supersede each other. There can be insufficient incentives for R&D if successful firms earn market profit only until competitors achieve something better. To solve this problem, patents must provide protection against future innovators. This paper proposes using a patentability requirement aminimuminnovation size required to get a patent toserve this purpose. I showthat a patentability requirement can stimulate R&D investment and increase dynamic efficiency. Intuitively, requiring firms to pursue larger innovations can prolong market incumbency because larger innovations are harder to achieve. Longer market incumbency then implies an increased reward to innovation, stimulating R&D investment.

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Bibliographic Info

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1185.

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Date of creation: Mar 1997
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Handle: RePEc:nwu:cmsems:1185

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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
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Web page: http://www.kellogg.northwestern.edu/research/math/
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  1. Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders in the Theory of Growth," NBER Working Papers 3099, National Bureau of Economic Research, Inc.
  2. Green, J.R. & Scotchmer, S., 1993. "On the Division of Profit in Sequential Innovation," Harvard Institute of Economic Research Working Papers 1638, Harvard - Institute of Economic Research.
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  9. O'DONOGHUE, Ted & SCOTCHMER, Suzanne & THISSE, Jacques-François, . "Patent breadth, patent life, and the pace of technological progress," CORE Discussion Papers RP -1314, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Citations

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Cited by:
  1. Chen, Yongmin & Pan, Shiyuan & Zhang, Tianle, 2014. "(When) Do stronger patents increase continual innovation?," Journal of Economic Behavior & Organization, Elsevier, vol. 98(C), pages 115-124.
  2. Guido Cozzi & Silvia Galli, 2009. "Science-Based R&D In Schumpeterian Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(s1), pages 474-491, 09.
  3. Schuett, F., 2012. "Inventors and Imposters: An Analysis of Patent Examination with Self-Selection of Firms into R&D," Discussion Paper 2012-026, Tilburg University, Tilburg Law and Economic Center.
  4. Nadolnyak, Denis A. & Sheldon, Ian M., 2002. "A Model Of Development Of Agricultural Biotechnological Innovations: Patent Policy Analysis," 2002 Annual meeting, July 28-31, Long Beach, CA 19802, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Prokop, Jacek & Regibeau, Pierre & Rockett, Katharine, 2010. "Minimum quality standards and novelty requirements in a one-short development race," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 4(15), pages 1-49.
  6. Christian Riis & Xianwen Shi, 2012. "Sequential Innovation and Optimal Patent Design," Working Papers tecipa-447, University of Toronto, Department of Economics.
  7. Chu, Angus C., 2007. "Optimal Patent Breadth: Quantifying the Effects of Increasing Patent Breadth," MPRA Paper 3910, University Library of Munich, Germany.
  8. Jaffe, Adam B., 2000. "The U.S. patent system in transition: policy innovation and the innovation process," Research Policy, Elsevier, vol. 29(4-5), pages 531-557, April.
  9. Gilbert, Richard J & Katz, Michael L, 2009. "Efficient Division of Profits from Complementary Innovations," Competition Policy Center, Working Paper Series qt5mr0s11v, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  10. Picard, Pierre M. & van Pottelsberghe de la Potterie, Bruno, 2013. "Patent office governance and patent examination quality," Journal of Public Economics, Elsevier, vol. 104(C), pages 14-25.
  11. Ghosh, Arghya & Kato, Takao & Morita, Hodika, 2007. "Discrete Innovation, Continuous Improvement, and Competitive Pressure," Working Papers 104-27, Department of Economics, Colgate University.
  12. Robert Hunt, 1999. "Patent reform: a mixed blessing for the U.S. economy?," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 15-29.
  13. Robert M. Hunt, 1999. "Nonobviousness and the incentive to innovate: an economic analysis of intellectual property reform," Working Papers 99-3, Federal Reserve Bank of Philadelphia.

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