Innovation-Specific Patent Protection
AbstractThis study develops an R&D-based growth model that features both vertical and horizontal innovation to shed some light on the current debate on whether patent protection stimulates or stifles innovation. Specifically, we analyze the growth and welfare effects of patent protection in the form of profit division between sequential innovators along the quality ladder. We show that patent protection has asymmetric effects on vertical innovation (i.e., quality improvement) and horizontal innovation (i.e., variety expansion). Maximizing the incentives for vertical (horizontal) innovation requires a profit-division rule that assigns the entire flow profit to the entrant (incumbent) of a quality ladder. In light of this finding, we argue that in order to properly analyze the growth and welfare implications of patent protection, it is important to firstly disentangle its different effects on vertical and horizontal innovation.
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Bibliographic InfoPaper provided by Institute of Economics, Academia Sinica, Taipei, Taiwan in its series IEAS Working Paper : academic research with number 09-A010.
Length: 33 pages
Date of creation: Oct 2009
Date of revision: 03 Dec 2009
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Web page: http://www.econ.sinica.edu.tw/index.php?foreLang=en
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economic growth; innovation; intellectual property rights;
Find related papers by JEL classification:
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-19 (All new papers)
- NEP-INO-2009-12-19 (Innovation)
- NEP-IPR-2009-12-19 (Intellectual Property Rights)
- NEP-MIC-2009-12-19 (Microeconomics)
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- Been-Lon Chen & Angus Chu, 2010. "On R&D spillovers, multiple equilibria and indeterminacy," Journal of Economics, Springer, vol. 100(3), pages 247-263, July.
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