From Thought to Practice: Appropriation and Endogenous Market Structure with Imperfect Intellectual Property Rights
We address the problem faced by innovators who have an idea for a marketable product but must hire employees to bring the product to the market. Information leakage implies that newly-hired employees become informed of the idea and may attempt to bring the product to the market themselves. We develop a bargaining model that accounts for this problem. In this model, employee’s rents endogenously reflect the bargaining power vis-à-vis the firm that is due to the knowledge of the information. The model has a unique symmetric equilibrium in which the innovator appropriates a sizable share of the surplus despite the absence of property rights for ideas. We show that this share stays bounded away from zero even as the number of agents required in the development grows to infinity. We also derive the conditions under which monopoly or competition arise on the product market. We find that when the degree of potential competition on the product market is high enough, a monopoly is generated by hiring all potential competitors within the same firm. Finally, the link between intellectual property rights enforcement and industry performance is explored, and normative implications are derived.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Jun 2004|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:4419. 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: ()
If references are entirely missing, you can add them using this form.