Intellectual Property Rights and Strategic Complementarities

Starting with the Uruguay Round, the issue of tighter IPR regime divides the rich and the poor countries; developed countries generally favour a tighter IPR that would not permit any free riding. However, the paper adopts a research methodology which starts with the well accepted premise that market power (incentive to innovation) is specific to output expectations and therefore is specific to strategic complementarities amongst various industries (Solow, 1998). In this context, the paper maintains that the good outcome, i.e. the realization of increasing returns to innovation, is particularly dependent on the possibility that the market power to innovation is specific to a growth process; a particular focus is then on the Youngian endogenous growth thesis where innovation induces further innovation through external economies, permitting further industrial differentiation (diversification) to permit increasing returns phenomenon; this approach to the problem, insofar as it focuses on the crucial role of the external economies, permits some free riding (as Romer, 1986 maintained that knowledge as a factors of production by a firm has external economies when it cannot be perfectly patented). The paper therefore focuses on specificity of free riding possibilities that facilitate the working of external economies, which, in turn, should permit (i) higher returns to innovation more than static returns, (ii) higher growth of innovation with possibility of participation of poor countries, and (thus) (iii) higher participation in international trade by the poor countries, giving fillip to international trade.