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Does a strong patent regime discourage innovation?

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  • Soma Dey

Abstract

Does a strengthening of the patent regime impact R&D expenditure? For the US semiconductor industry, a strengthening of the patent regime in the 1980s was followed by a sharp increase in patenting but had almost no impact on R&D expenditure. This paper attempts to understand this patent paradox by taking some of the industry features into account. We present a model of invention and product development in complex industries where product development involves putting together a large number of inventions and where licensing of patentable inventions is common. While a stronger patent regime leads to higher patenting in both in presence and absence of licensing, the positive relationship between patenting and R&D is weakened in presence of licensing since licensing provides an alternative way of accessing inventions. A stronger patent regime, therefore, may only create weak incentives to increase R&D, while strongly increasing patenting activities in such an industry.

Suggested Citation

  • Soma Dey, 2016. "Does a strong patent regime discourage innovation?," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(5), pages 485-502, July.
    • Handle: RePEc:taf:ecinnt:v:25:y:2016:i:5:p:485-502
    DOI: 10.1080/10438599.2015.1074350
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