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Patents with Simultaneous Innovations: The Patentability Requirements and the Direction of Innovation

Author

Listed:
  • Fabio M. Manenti

    (Department of Economics and Management M. Fanno, University of Padova)

  • Luca Sandrini

    (Research Centre of Quantitative Social and Management Sciences, Budapest University of Technology and Economics)

Abstract

We model a three-stage duopolistic game, in which firms first simultaneously choose the technological direction of their innovation, then invest in the chosen direction, and finally compete. Investments can be in overlapping or nonoverlapping technological territories, and their outcomes are uncertain. We show that compared to a regime where negligible innovations are patentable, strengthening the requirements for patentability can increase market efficiency. Importantly, we also show that the requirement level may affect the direction of firms' research and development trajectories. While in a mild patent regime firms tend to invest in overlapping technologies, stricter requirements may induce firms to operate in different technological areas, which increases social welfare and consumer surplus. We illustrate our general theory using two stylized Cournot competition models with process and product innovation.

Suggested Citation

  • Fabio M. Manenti & Luca Sandrini, 2023. "Patents with Simultaneous Innovations: The Patentability Requirements and the Direction of Innovation," Discussion Papers 2303, Budapest University of Technology and Economics, Quantitative Social and Management Sciences, revised Aug 2023.
    • Handle: RePEc:azp:qsmswp:2303
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    patents; R&D; patent requirements; direction of innovation;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • 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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