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Patent Scope and Technology Choice

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  • Färnstrand Damsgaard, Erika

    () (Research Institute of Industrial Economics (IFN))

Abstract

This paper analyzes the effect of an increase in patent scope on R&D and innovation. It presents a model where patent scope affects an entrant firm's technology choice and thereby creates a trade-off between R&D investments and wasteful duplication of R&D. The model predicts that an increase in patent scope can increase the probability of innovation if the incumbent’s profit increase from innovation is large and the patented technology has a small advantage over the alternative technology. However, when the model is extended to Stackelberg competition or licensing, the benefit of a broad patent scope to a large extent disappears.

Suggested Citation

  • Färnstrand Damsgaard, Erika, 2009. "Patent Scope and Technology Choice," Working Paper Series 792, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:0792
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    References listed on IDEAS

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    1. Joseph Zeira, 2011. "Innovations, patent races and endogenous growth," Journal of Economic Growth, Springer, vol. 16(2), pages 135-156, June.
    2. Cabral, Luís M B & Polak, Ben, 2004. "Does Microsoft Stifle Innovation? Dominant Firms, Imitation and R&D Incentives," CEPR Discussion Papers 4577, C.E.P.R. Discussion Papers.
    3. Paul Klemperer, 1990. "How Broad Should the Scope of Patent Protection Be?," RAND Journal of Economics, The RAND Corporation, pages 113-130.
    4. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
    5. Kitch, Edmund W, 1977. "The Nature and Function of the Patent System," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 265-290, October.
    6. Richard Gilbert & Carl Shapiro, 1990. "Optimal Patent Length and Breadth," RAND Journal of Economics, The RAND Corporation, pages 106-112.
    7. James Bessen & Eric Maskin, 2009. "Sequential innovation, patents, and imitation," RAND Journal of Economics, RAND Corporation, pages 611-635.
    8. Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 73(4), pages 741-748, September.
    9. Lerner, Josh, 1995. "Patenting in the Shadow of Competitors," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 463-495, October.
    10. Nancy T. Gallini, 2002. "The Economics of Patents: Lessons from Recent U.S. Patent Reform," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 131-154, Spring.
    11. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, April.
    12. Richard Blundell & Rachel Griffith & John van Reenen, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," Review of Economic Studies, Oxford University Press, vol. 66(3), pages 529-554.
    13. Pankaj Tandon, 1983. "Rivalry and the Excessive Allocation of Resources to Research," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 152-165, Spring.
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    Cited by:

    1. Federico Etro, 2010. "Endogenous market structures and antitrust policy," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 57(1), pages 9-45, March.

    More about this item

    Keywords

    Innovation; Patents; Patent policy; Licensing;

    JEL classification:

    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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