Patent Protection, Market Uncertainty, and R&D Investment
The main reason governments grant patent protection is to spur innovation. However, the size of the R&D stimulus from patent protection is far from clear because it depends on how effective patents are as a mechanism for appropriating returns. Drawing on real options investment theory, this paper highlights one mechanism through which patents may improve appropriability and stimulate R&D investment: patents reduce the effect of market uncertainty on the firm’s investment decision. We find that firm-level R&D investment falls in response to higher levels of uncertainty, but that patent protection partially mitigates the influence of uncertainty. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 93 (2011)
Issue (Month): 1 (February)
|Contact details of provider:|| Web page: http://mitpress.mit.edu/journals/|
|Order Information:||Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Arora, Ashish & Ceccagnoli, Marco & Cohen, Wesley M., 2008.
"R&D and the patent premium,"
International Journal of Industrial Organization,
Elsevier, vol. 26(5), pages 1153-1179, September.
- Pindyck, Robert S, 1991.
"Irreversibility, Uncertainty, and Investment,"
Journal of Economic Literature,
American Economic Association, vol. 29(3), pages 1110-48, September.
- Robert S. Pindyck, 1990. "Irreversibility, Uncertainty, and Investment," NBER Working Papers 3307, National Bureau of Economic Research, Inc.
- Pindyck, Robert, 1989. "Irreversibility, uncertainty, and investment," Policy Research Working Paper Series 294, The World Bank.
- Pindyck, Robert S., 1990. "Irreversibility, uncertainty, and investment," Working papers 3137-90., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Alan Carruth & Andy Dickerson & Andrew Henley, 1998.
"What Do We Know About Investment Under Uncertainty?,"
Studies in Economics
9804, School of Economics, University of Kent.
- Carruth, Alan & Dickerson, Andrew & Henley, Andrew, 2000. " What Do We Know about Investment under Uncertainty?," Journal of Economic Surveys, Wiley Blackwell, vol. 14(2), pages 119-53, April.
- Wesley M. Cohen, 2005. "Patents and Appropriation: Concerns and Evidence-super-1," The Journal of Technology Transfer, Springer, vol. 30(2_2), pages 57-71, 01.
- Mark Schankerman, 1998. "How Valuable is Patent Protection? Estimates by Technology Field," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 77-107, Spring.
- Goel, Rajeev K. & Ram, Rati, 2001. "Irreversibility of R&D investment and the adverse effect of uncertainty: Evidence from the OECD countries," Economics Letters, Elsevier, vol. 71(2), pages 287-291, May.
- Sunil Kanwar & Robert Evenson, 2003.
"Does intellectual property protection spur technological change?,"
Oxford Economic Papers,
Oxford University Press, vol. 55(2), pages 235-264, April.
- Sunil Kanwar & Robert E Evanson, 2004. "Does Intellectual Property Protection Spur Technological Change?," Levine's Working Paper Archive 122247000000000455, David K. Levine.
- Lanjouw, Jean Olson, 1998. "Patent Protection in the Shadow of Infringement: Simulation Estimations of Patent Value," Review of Economic Studies, Wiley Blackwell, vol. 65(4), pages 671-710, October.
When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:93:y:2011:i:1:p:147-159. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Pollock-Nelson)
If references are entirely missing, you can add them using this form.