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The importance of trademark protection for product differentiation and innovation

Author

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  • Dirk Crass

    (ZEW (Center for European Economic Research))

  • Franz Schwiebacher

    () (ZEW (Center for European Economic Research))

Abstract

Abstract Trademarks mark new product varieties. Trademarks may become associated with a favorable public recognition and evaluation that sustains the advantages from a horizontally differentiated market position. A favorable public assessment appears more important for firms in service sectors where production exhibits usually more experience characteristics than in manufacturing and for firms with vertically-differentiating product innovation. Using data from the 2011 German innovation survey, we find that for firms in service sectors, the use of trademarks increases the probability that the firm’s products and services are not easily substitutable by rival ones. This product-differentiating effect of trademarks in services is present for firms with new-to-the-market product innovation but not for firms without product innovation. This suggests that trademarks supplement the appropriation of product innovation rents in services. The number of trademarks exhibits a product-differentiating effect for service sector firms with imitative new-to-the-firm product innovation, which suggests differentiation due to proliferating product variants. Regarding firms in manufacturing sectors, trademarks do not show a conclusive product-differentiating effect.

Suggested Citation

  • Dirk Crass & Franz Schwiebacher, 2017. "The importance of trademark protection for product differentiation and innovation," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(2), pages 199-220, June.
    • Handle: RePEc:spr:epolin:v:44:y:2017:i:2:d:10.1007_s40812-016-0058-1
    DOI: 10.1007/s40812-016-0058-1
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    Keywords

    Innovation; Trademark; Product substitutability;

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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