Patent Portfolio Management of Sequential Innovations
This paper develops a model for understanding a firm's decisions regarding the maintenance (renewal) and patenting of sequential innovations and studies how these decisions are affected by the model's parameters, including maintenance fees and filing fees. The model demonstrates that the two prices exert negative effects on renewal and patenting, respectively (i.e. adverse own price effects). The model also offers a discriminating testable hypothesis, predicted on the cross-price effects, to identify complementarity or substitutability across sequential innovations. Our regression results show that the probability of patent renewal and maintenance fees are correlated negatively and that the patent propensity and application fees are correlated negatively. We also demonstrate that higher application fees are associated with lower probability of patent renewal, which corroborates the case of complementarity in sequential innovations.
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