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Patent Protection, Optimal Licensing, and Innovation with Endogenous Entry

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  • Suzuki, Keishun

Abstract

How does patent policy affect innovation when patent licensing is crucial for firms? To address this question, the present paper incorporates voluntary patent licensing between an innovator and followers, which has been discussed in the literature of industrial organization, into a dynamic general equilibrium model. Unlike in existing studies, both the licensing fee and the number of licensees are endogenously determined by the innovator’s maximization and the free-entry condition. Using this model, we show that strong patent protection does not enhance innovation, economic growth, and welfare. Furthermore, the extended analysis provides a policy implication that the effect of patent policy depends on how difficult further innovation is without patent licensing of the current leading technology.

Suggested Citation

  • Suzuki, Keishun, 2017. "Patent Protection, Optimal Licensing, and Innovation with Endogenous Entry," MPRA Paper 82712, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:82712
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    References listed on IDEAS

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    21. repec:wly:soecon:v:82:3:y:2016:p:809-825 is not listed on IDEAS
    22. Chin-Sheng Chen, 2017. "Endogenous Market Structure and Technology Licensing," The Japanese Economic Review, Springer, vol. 68(1), pages 115-130, March.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Suzuki, Keishun, 2020. "Patent Puzzle, Inflation, and Internal Financial Constraint," MPRA Paper 101937, University Library of Munich, Germany.
    2. Haoyang Song & Jianhua Hou & Yang Zhang, 2022. "Patent protection: does it promote or inhibit the patented technological knowledge diffusion?," Scientometrics, Springer;Akadémiai Kiadó, vol. 127(5), pages 2351-2379, May.
    3. Keishun Suzuki, 2020. "Competition, patent protection, and innovation with heterogeneous firms in an endogenous market structure," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 729-750, June.
    4. Kishimoto, Shin & Suzuki, Keishun, 2021. "Growth and Welfare Effects of Interventions in Patent Licensing Negotiations," MPRA Paper 108009, University Library of Munich, Germany.
    5. Keishun Suzuki & Shin Kishimoto, 2023. "Leading Patent Breadth, Endogenous Quality Choice, and Economic Growth," ISER Discussion Paper 1205, Institute of Social and Economic Research, Osaka University.

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    More about this item

    Keywords

    innovation; patent protection; optimal patent licensing; endogenous market structure.;
    All these keywords.

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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