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Appropriability, patents, and rates of innovation in complex products industries

  • Luigi Marengo
  • Corrado Pasquali
  • Marco Valente
  • Giovanni Dosi

The economic theory of intellectual property rights is based on a rather narrow view of both competition and technological knowledge. We suggest some ways of enriching this framework with a more empirically grounded view of both and, by means of a simulation model, we analyse the impact of different property right regimes on the dynamics of a complex product industry, that is an industry where products are complex multi-component objects and competition takes place mainly through differentiation and component innovation. We show that, as the complexity of the product spaces increases, stronger patent regimes yield lower rates of innovation, lower product quality, and lower consumers’ welfare.

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Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 21 (2012)
Issue (Month): 8 (November)
Pages: 753-773

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Handle: RePEc:taf:ecinnt:v:21:y:2012:i:8:p:753-773
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  1. Bronwyn Hall, 2004. "Exploring the patent explosion," ESRC Centre for Business Research - Working Papers wp291, ESRC Centre for Business Research.
  2. Adam B. Jaffe, 1999. "The U.S. Patent System in Transition: Policy Innovation and the Innovation Process," NBER Working Papers 7280, National Bureau of Economic Research, Inc.
  3. Tor Jakob Klette & Samuel Kortum, 2002. "Innovating Firms and Aggregate Innovation," NBER Working Papers 8819, National Bureau of Economic Research, Inc.
  4. Giovanni Dosi & Luigi Marengo & Corrado Pasquali, 2006. "How Much Should Society Fuel the Greed of Innovators? On the Relations between Appropriability, Opportunities and Rates of Innovation," LEM Papers Series 2006/17, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  5. Simon P. Anderson & Andre de Palma & Jacques-Francois Thisse, 1987. "Demand for Differentiated Products," Discussion Papers 726, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. 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.
  7. Boldrin, Michele & Levine, David, 2002. "The Case Against Intellectual Property," CEPR Discussion Papers 3273, C.E.P.R. Discussion Papers.
  8. Marengo, Luigi & Dosi, Giovanni, 2005. "Division of labor, organizational coordination and market mechanisms in collective problem-solving," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 303-326, October.
  9. Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September.
  10. 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.
  11. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science.
  12. Winter, Sidney G., 1984. "Schumpeterian competition in alternative technological regimes," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 287-320.
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