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Patent Races, Product Standards, and International Competition

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Abstract

The authors examine anticipatory product standards intended to improve the strategic position of firms in an international patent race where firms do R&D to develop products that are close substitutes. The effects of a standard depend on the way the standard is specified, which firm develops which product, and the order of discovery. Simple standards can be time inconsistent because of consumer losses that occur when products ruled out by the standard are discovered first. A state-contingent standard is shown to be time consistent when compulsory licensing by the foreign firm is introduced. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Suggested Citation

  • Jensen, R. & Thursby, M., 1994. "Patent Races, Product Standards, and International Competition," Papers 94-015, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
  • Handle: RePEc:fth:purkib:94-015
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    1. Rachel McCulloch, 1988. "The Challenge to U.S. Leadership in High-Technology Industries (Can the United States Maintain Its Lead? Should It Try?)," NBER Working Papers 2513, National Bureau of Economic Research, Inc.
    2. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
    3. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-526, June.
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    5. Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June.
    6. Kala Krishna, 1988. "High-Tech Trade Policy," NBER Chapters, in: Issues in US-EC Trade Relations, pages 285-314, National Bureau of Economic Research, Inc.
    7. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908, Elsevier.
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    Cited by:

    1. Vitor Trindade & Johannes Moenius, 2007. "Networks, Standards and Intellectual Property Rights," Working Papers 0705, Department of Economics, University of Missouri.
    2. MANTOVANI Andrea & VANCAUTEREN Mark, 2010. "The Harmonization of Technical Barriers to Trade, Innovation and Export Behavior: Theory with an Application to EU Environmental Regulations," EcoMod2003 330700094, EcoMod.
    3. Schneider, Cédric, 2008. "Fences and competition in patent races," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1348-1364, November.
    4. Gandal, Neil & Shy, Oz, 2001. "Standardization policy and international trade," Journal of International Economics, Elsevier, vol. 53(2), pages 363-383, April.
    5. Czarnitzki, Dirk & Kraft, Kornelius, 2004. "An empirical test of the asymmetric models on innovative activity: who invests more into R&D, the incumbent or the challenger?," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 153-173, June.
    6. Choi, Jay Pil, 1996. "Standardization and experimentation: Ex ante vs. ex post standardization," European Journal of Political Economy, Elsevier, vol. 12(2), pages 273-290, September.
    7. Harald Wiese, 2002. "Strategic Trade Policy in the Presence of Network Effects," German Economic Review, Verein für Socialpolitik, vol. 3(2), pages 155-183, May.
    8. Klimenko, Mikhail M., 2009. "Policies and international trade agreements on technical compatibility for industries with network externalities," Journal of International Economics, Elsevier, vol. 77(2), pages 151-166, April.

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    competition ; trade;

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