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Induced innovation and technology trajectory: Evidence from smoking cessation products

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  • Werfel, Seth H.
  • Jaffe, Adam B.

Abstract

Economic theory predicts that policies that discourage the consumption of a particular good will induce innovation in a socially desirable substitute. However, the literature on technology trajectories emphasizes the possibility of innovation waves associated with the identification of new dominant designs. We incorporate both of these possibilities in a model of the invention of new smoking cessation products, based on a new dataset of patents on such products from 1951 to 2004. We find that an increase in cigarette tax levels had no discernible impact on the industry-wide rate of invention in smoking cessation products. However, we do find evidence consistent with the emergence of dominant designs having substantial positive innovation effects. We estimate that the introduction of the nicotine gum and patch increased the overall rate of patenting activity in smoking cessation products by 60–75%, subject to a 10% rate of decay. Finally, we show that these products had greater effects on the patenting of corporations than individual inventors.

Suggested Citation

  • Werfel, Seth H. & Jaffe, Adam B., 2013. "Induced innovation and technology trajectory: Evidence from smoking cessation products," Research Policy, Elsevier, vol. 42(1), pages 15-22.
  • Handle: RePEc:eee:respol:v:42:y:2013:i:1:p:15-22
    DOI: 10.1016/j.respol.2012.04.013
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    More about this item

    Keywords

    Induced innovation; Technology trajectory; Smoking cessation products; Cigarette taxes;
    All these keywords.

    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
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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