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How Much Should Society Fuel the Greed of Innovators? On the Relations between Appropriability, Opportunities and Rates of Innovation

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Author Info
Giovanni Dosi
Luigi Marengo
Corrado Pasquali

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Abstract

The paper attempts a critical assessment of both the theory and the empirical evidence on the role of appropriability and in particular of Intellectual Property Right (IPR) as incentives for technological innovation. We start with a critical discussion of the standard justification of the attribution of IPR in terms of "market failures" in knowledge generation. Such an approach we argue misses important features of technological knowledge and also neglects the importance of non-market institutions in the innovation process. Next, we examine the recent changes in the IPR regimes and their influence upon both rates of patenting and underlying rates of innovation. The evidence broadly suggests that, first, IPRs are not the most important device apt to "profit from innovation"; and second, they have at best no impact, or possibly even a negative impact on the underlying rates of innovation. Rather, we argued, technology- and industry-specific patterns of innovation are primarily driven by the opportunities associated with each technological paradigm. Conversely, firm-specific abilities to seize them and "profit from innovation" depend partly on adequacy of the strategic combinations identified by the taxonomy of Teece (1986) and partly on idiosyncratic capabilities embodied in the various firms.

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Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2006/17.

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Date of creation: 22 Jul 2006
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Handle: RePEc:ssa:lemwps:2006/17

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Related research
Keywords: Appropriability; Intellectual Property Right; Innovation; Technological opportunities;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
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  1. Kortum, Samuel & Lerner, Josh, 1998. "Stronger protection or technological revolution: what is behind the recent surge in patenting?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 247-304, June. [Downloadable!] (restricted)
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  2. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, vol. 91(364), pages 907-18, December. [Downloadable!] (restricted)
  3. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science. [Downloadable!]
  4. Bronwyn H. Hall, 2005. "Exploring the Patent Explosion," The Journal of Technology Transfer, Springer, vol. 30(2_2), pages 35-48, 01. [Downloadable!]
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  5. Petra Moser, 2003. "How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World Fairs," NBER Working Papers 9909, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Horstmann, Ignatius & MacDonald, Glenn M & Slivinski, Alan, 1985. "Patents as Information Transfer Mechanisms: To Patent or (Maybe) Not to Patent," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 837-58, October. [Downloadable!] (restricted)
  7. Teece, David J. & Rumelt, Richard & Dosi, Giovanni & Winter, Sidney, 1994. "Understanding corporate coherence : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 1-30, January. [Downloadable!] (restricted)
  8. Dosi, Giovanni, 1982. "Technological paradigms and technological trajectories : A suggested interpretation of the determinants and directions of technical change," Research Policy, Elsevier, vol. 11(3), pages 147-162, June. [Downloadable!] (restricted)
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  9. Nancy T. Gallini, 2002. "The Economics of Patents: Lessons from Recent U.S. Patent Reform," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 131-154, Spring. [Downloadable!] (restricted)
  10. Giovanni Dosi & Luigi Orsenigo & Mauro Sylos Labini, 2002. "Technology and the Economy," LEM Papers Series 2002/18, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
  11. Josh Lerner, 2002. "150 Years of Patent Protection," American Economic Review, American Economic Association, vol. 92(2), pages 221-225, May. [Downloadable!]
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  12. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Merges, Robert P. & Nelson, Richard R., 1994. "On limiting or encouraging rivalry in technical progress: The effect of patent scope decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 25(1), pages 1-24, September. [Downloadable!] (restricted)
  14. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc. [Downloadable!]
  15. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1988. "Appropriating the Returns from Industrial R&D," Cowles Foundation Discussion Papers 862, Cowles Foundation, Yale University. [Downloadable!]
  16. Teece, David J., 1986. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 15(6), pages 285-305, December. [Downloadable!] (restricted)
  17. 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. [Downloadable!] (restricted)
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  18. Scotchmer, Suzanne, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Francesco Bogliacino & Alberto José Naranjo Ramos, 2008. "Optimal intellectual property rights protection: the case of Colombia," Economics Bulletin, Economics Bulletin, vol. 15(20), pages 1-15. [Downloadable!]
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