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The Protection of Innovations

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  • Gamal Atallah

    () (Department of Economics, University of Ottawa)

Abstract

This paper proposes a model where firms invest in secrecy to limit technological spillovers accruing to their competitors, in addition to investing in cost-reducing R&D. The main result of the paper is that increases in spillovers increase secrecy, suggesting that legal and strategic protection are substitutes. Higher product differentiation is associated with higher levels of innovation and lower levels of secrecy. An increase in the size of the market, a reduction in the cost of secrecy,or a reduction in the cost of R&D, all lead to an increase in secrecy. As for the effect of spillovers on effective cost reduction, it is positive when products are sufficiently differentiated, and has an inverted-U shape with low product differentiation. Compared to price competition, quantity competition yield higher levels of R&D, secrecy and effective cost reduction.

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File URL: http://www.socialsciences.uottawa.ca/eco/pdf/cahiers/0702E-old.pdf
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Bibliographic Info

Paper provided by University of Ottawa, Department of Economics in its series Working Papers with number 0402E.

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Length: 26 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:ott:wpaper:0402e

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Related research

Keywords: Secrecy; Protection; Innovation; Technology; Spillovers; R&D; Appropriability;

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References

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  1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December.
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  5. George Symeonidis, 2002. "Comparing Cournot and Bertrand Equilibria in a Differentiated Duopoly with Product R&D," Economics Discussion Papers 539, University of Essex, Department of Economics.
  6. Mariti, P & Smiley, R H, 1983. "Co-Operative Agreements and the Organization of Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 31(4), pages 437-51, June.
  7. Severinov, Sergei, 2001. "On Information Sharing and Incentives in R&D," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 542-64, Autumn.
  8. Atallah, G., 2000. "Information Sharing and the Stability of Cooperation in Research Joint Ventures," Cahiers de recherche 2000-17, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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  12. David Pérez-Castrillo & Bruno Cassiman & Reinhilde Veugelers, 2000. "Endogeneizing know-how flows through the nature of R&D investments," UFAE and IAE Working Papers 464.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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  16. Minoru Kitahara & Toshihiro Matsumura, 2006. "Realized Cost-Based Subsidies For Strategic R&D Investments With "Ex Ante" And "Ex Post" Asymmetries," The Japanese Economic Review, Japanese Economic Association, vol. 57(3), pages 438-448.
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  19. James D. Adams, 2000. "Endogenous R&D Spillovers and Industrial Research Productivity," NBER Working Papers 7484, National Bureau of Economic Research, Inc.
  20. Poyago-Theotoky, Joanna, 1998. "R&D Competition in a Mixed Duopoly under Uncertainty and Easy Imitation," Journal of Comparative Economics, Elsevier, vol. 26(3), pages 415-428, September.
  21. Branstetter, Lee & Sakakibara, Mariko, 1998. "Japanese Research Consortia: A Microeconometric Analysis of Industrial Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 46(2), pages 207-33, June.
  22. Joanna Poyago-Theotoky, 1999. "A Note on Endogenous Spillovers in a Non-Tournament R & D Duopoly," Review of Industrial Organization, Springer, vol. 15(3), pages 253-262, November.
  23. Arundel, Anthony, 2001. "The relative effectiveness of patents and secrecy for appropriation," Open Access publications from Maastricht University urn:nbn:nl:ui:27-19185, Maastricht University.
  24. Miyagiwa, Kaz & Ohno, Yuka, 2002. "Uncertainty, spillovers, and cooperative R&D," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 855-876, June.
  25. Klette, T.J. & Moen, J. & Griliches, Z., 1999. "Do Subsidies to Commercial R&D Reduce Market Failures? Microeconometric Evaluation Studies," Papers 16/99, Norwegian School of Economics and Business Administration-.
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Citations

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Cited by:
  1. Chrysovalantou Milliou, 2009. "Endogenous protection of R&D investments," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 184-205, February.
  2. Olena Senyuta & Kresimir Zigic, 2012. "Managing Spillovers: An Endogenous Sunk Cost Approach," CERGE-EI Working Papers wp472, The Center for Economic Research and Graduate Education - Economic Institute, Prague.

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