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The Protection of Innovations

  • Gamal Atallah

This paper proposes a model where firms invest in secrecy to limit technological spillovers accruing to their competitors, in addition to investing in cost-reducing R&D. The main result of the paper is that increases in spillovers increase secrecy, suggesting that legal and strategic protection are substitutes. Higher product differentiation is associated with higher levels of innovation and lower levels of secrecy. An increase in the size of the market, a reduction in the cost of secrecy, or a reduction in the cost of R&D, all lead to an increase in secrecy. As for the effect of spillovers on effective cost reduction, it is positive when products are sufficiently differentiated, and has an inverted-U shape with low product differentiation. Compared to price competition, quantity competition yields higher levels of R&D, secrecy and effective cost reduction. Le papier propose un modèle où les firmes investissent dans la protection de leurs innovations afin de réduire les externalités de recherche reçues par leurs concurrents, en plus d'investir dans la R&D permettant de réduire leurs coûts de production. Le résultat principal est qu'une augmentation des externalités technologiques augmente l'investissement en protection, ce qui implique que la protection légale et stratégique sont des substituts. Un niveau plus élevé de différenciation des produits est associé avec davantage d'innovation et moins de protection. Une augmentation dans la taille du marché, une réduction des coûts de la protection, ou une réduction des coûts de la recherche, induisent une augmentation de la protection. Les externalités de recherche augmentent la réduction des coûts lorsque le niveau de différenciation des produits est élevé, et ont un effet en forme de U inversé lorsque le niveau de différentiation est faible. La concurrence en quantités génère des niveaux plus élevés de R&D, de protection et de réduction des coûts.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2004s-02.

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Length: 28 pages
Date of creation: 01 Jan 2004
Date of revision:
Handle: RePEc:cir:cirwor:2004s-02
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