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Entrepreneurial Innovation, Patent Protection And Industry Dynamics

  • Gerard Llobet


    (CEMFI, Centro de Estudios Monetarios y Financieros)

  • Javier Suarez


    (CEMFI, Centro de Estudios Monetarios y Financieros)

We assess the effects of imitation and intellectual property (IP) protection in a model of industry dynamics in which the value of IP is eroded by further innovations and imitations. Innovations result from the development of ideas engendered by entrepreneurs. We find that innovation and welfare are decreasing in the protection of IP against further innovations, while their relationship with the protection against imitations typically has an inverted-U shape (partly because imitation reduces the resistance of incumbents to innovators). We also find that the welfare gains from increasing IP protection increase if entrepreneurs are financially constrained.

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Paper provided by CEMFI in its series Working Papers with number wp2010_1001.

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Date of creation: Feb 2010
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Handle: RePEc:cmf:wpaper:wp2010_1001
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