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Who is Afraid of Pirates? An Experiment on the Deterrence of Innovation by Imitation

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  • Christoph Engel

    () (Max Planck Institute for Research on Collective Goods, Bonn)

  • Marco Kleine

    () (Max Planck Institute for Research on Collective Goods, Bonn)

Abstract

In the policy debate, intellectual property is often justified by what seems to be a straightforward argument: if innovators are not protected against others appropriating their ideas, incentives for innovation are suboptimally low. Now in most industries for most potential users, appropriating a foreign innovation is itself an investment decision fraught with cost and risk. Nonetheless standard theory predicts too little innovation. Arguably the problem is exacerbated by innovators’ risk aversion as well as their aversion against others benefitting from their efforts without contributing to the cost, and without bearing innovation risk. We model the situation as a game and test it in the lab. We find even more appropriation than predicted by standard theory. But the risk and the experience of appropriation does not deter innovation. We find even more innovation than predicted by theory, and actually more than would be efficient. In the lab, the prospect of givingimitators a free lunch does not have a chilling effect on innovation.

Suggested Citation

  • Christoph Engel & Marco Kleine, 2013. "Who is Afraid of Pirates? An Experiment on the Deterrence of Innovation by Imitation," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2013_07, Max Planck Institute for Research on Collective Goods, revised Nov 2013.
  • Handle: RePEc:mpg:wpaper:2013_07
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    References listed on IDEAS

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    Cited by:

    1. Santos-Arteaga, Francisco J. & Di Caprio, Debora & Tavana, Madjid & O’Connor, Aidan, 2017. "Innovation dynamics and labor force restructuring with asymmetrically developed national innovation systems," International Business Review, Elsevier, vol. 26(1), pages 36-56.

    More about this item

    Keywords

    Innovation; imitation; appropriation; patent; fairness of desert;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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