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Innovation Beyond Patents: Technological Complexity as a Protection against Imitation

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  • Henry, Emeric
  • Ruiz-Aliseda, Francisco

Abstract

A large portion of innovators do not patent their inventions. This is a relative puzzle since innovators are often perceived to be at the mercy of imitators in the absence of legal protection. In practice, innovators however invest actively in making their products technologically hard to reverse-engineer. We consider the dynamics of imitation and investment in such protection technologies, both by the innovator and by imitators. We show that it can justify high level of profits beyond patents and can account for the differences across sectors in the propensity to patent. Surprisingly, in general, the protection technologies that yield the highest profits for the innovator are expensive and do not protect well. Our model also allows us to draw conclusions on the dynamics of mobility of researchers in innovative industries.

Suggested Citation

  • Henry, Emeric & Ruiz-Aliseda, Francisco, 2012. "Innovation Beyond Patents: Technological Complexity as a Protection against Imitation," CEPR Discussion Papers 8870, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8870
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    References listed on IDEAS

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    1. Petra Moser, 2005. "How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World's Fairs," American Economic Review, American Economic Association, pages 1214-1236.
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    Citations

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    Cited by:

    1. Benoit, Jean-Pierre & Galbiati, Roberto & Henry, Emeric, 2013. "Rational parasites," CEPR Discussion Papers 9351, C.E.P.R. Discussion Papers.
    2. Emeric Henry & Francisco Ruiz-Aliseda, 2016. "Keeping Secrets: The Economics of Access Deterrence," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 95-118, August.
    3. Benoît, Jean-Pierre & Galbiati, Roberto & Henry, Emeric, 2017. "Investing to cooperate: Theory and experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 1-17.
    4. Henry, Emeric & Ruiz-Aliseda, Francisco, 2012. "Innovation Beyond Patents: Technological Complexity as a Protection against Imitation," CEPR Discussion Papers 8870, C.E.P.R. Discussion Papers.
    5. Billette de Villemeur, Etienne & Ruble, Richard & Versaevel, Bruno, 2014. "Innovation and imitation incentives in dynamic duopoly," MPRA Paper 59453, University Library of Munich, Germany.
    6. Senyuta, Olena & Žigić, Krešimir, 2016. "Managing spillovers: An endogenous sunk cost approach," Information Economics and Policy, Elsevier, vol. 35(C), pages 45-64.
    7. Andreas Panagopoulos & In-Uck Park, 2016. "Patenting vs. Secrecy for Startups and the Trade of Patents as Negotiating Assets," Working Papers 1610, University of Crete, Department of Economics.

    More about this item

    Keywords

    complexity; dynamic games; imitation; innovation;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • 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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