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Patent policy, invention and innovation in the theory of Schumpeterian growth

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  • Klein, Michael A.

Abstract

I develop an endogenous growth model that separates firm decisions to invent, patent, and commercialize new innovations. I use the model to examine how multiple dimensions of patent policy impact economic growth by shaping these relative incentives. I pay particular attention to the role of patenting requirements that dictate how far along the development process an inventor must progress to obtain a patent. The model formalizes how strengthening such requirements generates competing effects on economic growth; stronger requirements reduce ex ante research incentives by increasing the expected cost of patenting, but increase ex post incentives to fully develop patented inventions into commercial innovations by decreasing the additional cost associated with commercialization. Overall, my analysis supports the use of stronger patenting requirements as an effective policy tool to improve economic outcomes by shifting incentives away from invention in the pursuit of patents and towards the development of commercial innovations.

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  • Klein, Michael A., 2025. "Patent policy, invention and innovation in the theory of Schumpeterian growth," Journal of Economic Dynamics and Control, Elsevier, vol. 176(C).
    • Handle: RePEc:eee:dyncon:v:176:y:2025:i:c:s0165188925000788
    DOI: 10.1016/j.jedc.2025.105112
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    Keywords

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    JEL classification:

    • 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
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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