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The Escape-Infringement Effect of Blocking Patents on Innovation and Economic Growth

  • Chu, Angus C.
  • Pan, Shiyuan

This study develops a Schumpeterian growth model to analyze the effects of different patent instruments on innovation. We first analyze patent breadth that captures the traditional positive effect of patent rights on innovation. Then, we consider a profit-division rule between entrants and incumbents. Given the division of profit, increasing the share of profit assigned to incumbents reduces entrants' incentives for innovation. This aspect of blocking patents captures the recently proposed negative effect of patent rights on innovation. Finally, blocking patents generate a non-monotonic effect on innovation when the step size of innovation is endogenous due to a novel escape-infringement effect. Calibrating the model to aggregate data, we find that a marginal increase in the blocking effect of patent protection is likely to raise economic growth.

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File URL: http://mpra.ub.uni-muenchen.de/27233/1/MPRA_paper_27233.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27233.

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Date of creation: Dec 2010
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Handle: RePEc:pra:mprapa:27233
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  1. Horowitz, Andrew W & Lai, Edwin L-C, 1996. "Patent Length and the Rate of Innovation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 785-801, November.
  2. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  3. Judd, Kenneth L, 1985. "On the Performance of Patents," Econometrica, Econometric Society, vol. 53(3), pages 567-85, May.
  4. Cozzi Guido, 2007. "The Arrow Effect under Competitive R&D," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-20, January.
  5. Ryo Horii & Tatsuro Iwaisako, 2005. "Economic Growth with Imperfect Protection of Intellectual Property Rights," Development and Comp Systems 0508001, EconWPA.
  6. Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers 148, Princeton, Woodrow Wilson School - Public and International Affairs.
  7. Furukawa, Yuichi, 2010. "Intellectual property protection and innovation: an inverted-U relationship," Economics Letters, Elsevier, vol. 109(2), pages 99-101, November.
  8. Cozzi, Guido & Giordani, Paolo E. & Zamparelli, Luca, 2007. "The refoundation of the symmetric equilibrium in Schumpeterian growth models," Journal of Economic Theory, Elsevier, vol. 136(1), pages 788-797, September.
  9. Maggie Xiaoyang Chen & Murat Iyigun, 2011. "Patent Protection and Strategic Delays in Technology Development: Implications for Economic Growth," Southern Economic Journal, Southern Economic Association, vol. 78(1), pages 211-232, July.
  10. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
  11. Akiyama, Taro & Furukawa, Yuichi, 2009. "Intellectual property rights and appropriability of innovation," Economics Letters, Elsevier, vol. 103(3), pages 138-141, June.
  12. Furukawa, Yuichi, 2007. "The protection of intellectual property rights and endogenous growth: Is stronger always better?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(11), pages 3644-3670, November.
  13. Michele Boldrin & David K Levine, 2008. "Against Intellectual Monopoly," Levine's Bibliography 122247000000002371, UCLA Department of Economics.
  14. O'Donoghue, Ted & Zweimüller, Josef, 1998. "Patents in a Model of Endogenous Growth," Economics Series 56, Institute for Advanced Studies.
  15. Li, Chol-Won, 2001. "On the Policy Implications of Endogenous Technological Progress," Economic Journal, Royal Economic Society, vol. 111(471), pages C164-79, May.
  16. Ai-Ting Goh & Jacques Olivier, 2002. "Optimal Patent Protection in a Two-Sector Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1191-1214, November.
  17. Josh Lerner, 2009. "The Empirical Impact of Intellectual Property Rights on Innovation: Puzzles and Clues," American Economic Review, American Economic Association, vol. 99(2), pages 343-48, May.
  18. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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